Current Policy Projections
The CAT expects China’s current policy projections (including COVID-19 impacts) to reach GHG emissions levels (excl. LULUCF) of between 12.4-13.6 GtCO2e/year in 2020 and 12.9–14.7 GtCO2e/year in 2030. This is an increase in total GHG emissions of -3% to +6% above 2015 levels by 2020 and +1% to +15% by 2030. China is still projected to meet both its 2020 pledge and its NDC targets despite increasing medium-term emissions in the upper bound. China’s previous lead climate negotiator, Xie Zhenhua, had also expressed the opinion that China could meet its 2030 peaking targets early, reflecting the conclusions of other studies (Gallagher et al., 2019b; Green & Stern, 2016; H. Wang et al., 2019; Xu et al., 2018), while CAT analysis confirms that China is also likely to safely meet its 2030 carbon intensity target as well.
China’s CO2 emissions are estimated to have risen 2.3% in 2018 and 2.6% in 2019 due to increased fossil fuel combustion and cement production (Grant & Larsen, 2020; Hausfather, 2019; Korsbakken et al., 2019; Myllyvirta, 2019b). The COVID-19 pandemic led to a lockdown of economic activity in China, with carbon-intensive manufacturing, construction, and transportation sectors heavily affected. This led to an emissions drop of approximately 25% for CO2 and over 30% for nitrous oxides and particulate matter in Q1 (ECMWF, 2020; Evans, 2020; NASA, 2020). The CAT further estimates total GHG emissions will rise by 0.8% in 2020 in an optimistic economic recovery scenario and fall by 7.7% in a pessimistic scenario. This is within the range of statistics published by Carbon Monitor, which reports emissions falling by 3.7% between June 2019 and June 2020 (Carbon Monitor, 2020).
In May 2020, during the annual Two Sessions with the National People’s Congress, China’s most important political meeting of the year, Premier Li Keqiang announced the government will drop the national GDP target for the first time since records began in 1990 – a clear lack of faith in the 5 to 6% growth target anticipated at the beginning of the year (The State Council of the People’s Republic of China, 2020). The Premier also hinted at a decrease of the 2020 target on energy consumption per GDP, although he gave no concrete details (Bloomberg News, 2020b). National statistics for Q1 confirmed the economy had contracted by 6.8% (National Bureau of Statistics of China, 2020b). By June 2020, China’s economy was already showing signs of recovery, with the economy growing 3.2% in Q2 from a year earlier, exceeding many economists’ expectations of 2.5%. China’s economy had not failed to grow over a total fiscal year since the 1970s (National Bureau of Statistics of China, 2020a; Reuters, 2020).
Evaluation of China’s COVID-19 economic recovery stimulus strategy in the climate field is mixed. While the government is intentionally staying away from the carbon-intensive recovery packages following the 2008 financial crisis, showing that low-carbon growth is indeed a priority, it is also clear that China will not focus on a green recovery similar to the European Union and South Korea, with only a small proportion of economic stimulus going to green projects (Vivid Economics, 2020).
The Ministry of Finance is expected to issue more than CNY four trillion (USD 565 billion) worth of stimulus in 2020, roughly the same amount of the post-financial crisis despite the economy being twice as large today (Bloomberg News, 2020a). The post-COVID-19 packages are less focused on infrastructure projects including heavy steel and cement production, instead focusing on “neo-infrastructure” including 5G networks, artificial intelligence, and other forms of cutting-tech innovation. However, the expansion of networks and data centres also have serious climate implications for a country whose data centres consume more than 160 TWh of electricity a year while predominantly running on coal (He & Ruiqi, 2020).
High-speed rail construction, public transport, and electric mobility projects, which could displace conventional carbon-intensive modes of transport, are also included in the scope of the stimulus. While on paper the stimulus looks cleaner than expected, there is no explicit large budget earmarked for low-emission projects and little guidance from the government on how provinces and municipalities can use the stimulus. Without this guidance, provinces may continue the concerning 2020 trend that has seen high investment into construction and coal (Gosens & Jotzo, 2020).
China’s national emissions trading system (ETS) is the most significant economy-wide climate policy in the country. The ETS plans to start operating in 2020 and initially applies to the power sector (coal and gas plants) but will expand to seven other sectors in the future, becoming the world’s largest trading system covering one-seventh of global CO2 emissions from fossil-fuel combustion. The policy instrument is aimed at encouraging further development in slowing CO2 emissions-intensity improvements of coal plants, as well as earlier retirement for a young coal-fired power plant fleet (IEA, 2020a).
Previous caution regarding the emissions impact of the system is now looking more justified (Jotzo et al., 2018). Reports suggest the Ministry of Ecology and Environment (MEE) have proposed new relaxed intensity benchmarks for power plants, including 1.003 gCO2/kWh for coal plants with capacity over 300 MW. Considering that China Energy Investment Corp, China’s largest coal power company, emitted an average intensity of 0.719 gCO2/kWh across all plants in 2019, the MEE’s new proposal could result in an almost 30% over-allocation of allowances. Gas-fired power plants also received a proposal to relax the intensity benchmark by 6%, to 0.404 gCO2/kWh. Over-emitting power plants may also not need to pay penalties for additional emissions past a ceiling of 20% (Reklev, 2020).
China’s actions abroad will also have an important impact on future global greenhouse gas emissions, due to the financing and building of both fossil-fuel and renewables infrastructure worldwide through its Belt and Road Initiative (BRI), which involves 126 countries that could account for as much as 66% of global carbon emissions in 2050 (Jun et al., 2019).
Since 2014, Chinese banks have invested over five times more in developing coal-fired capacity than wind and solar capacity in Belt and Road countries; since 2000, loans have totalled upwards of USD 50 billion (Reuters, 2019b). Of all coal-fired power plants under development outside of China, one quarter, or 102 GW of capacity, have been committed to by - or involve proposed funding from - Chinese financial institutions and companies (Shearer et al., 2019).
The global pandemic has also impacted BRI as investments dropped by roughly 50% (25 USD billion) in the first half of 2020 compared to 2019. Although this drop in overall investment led to the highest share of renewable energy investments in BRI in the first half of any year, investments into coal-fired power plants still make up 35% of all energy-related BRI investments so far in 2020 (C. N. Wang, 2020). China’s global policy banks have also issued loans totalling upward of USD 50 billion for coal projects since 2000. BRI policy has solidified China’s position as the top global source for coal financing, even as the second and third largest coal finance lenders (South Korea and Japan) signal moves away from such lending in the post-pandemic era (Climate Action Tracker, 2020a, 2020b; Pearl, 2020).
Controlling coal consumption
China’s increased coal consumption and development in recent years are inconsistent with the Paris Agreement and the opposite of global trends. In 2018, coal accounted for 62% of China’s total primary energy supply, and 66% of its electricity production. Globally, coal capacity outside China has been declining since 2018 (Shearer, 2020). China also accounted for 52% of the world’s primary coal energy supply (IEA, 2019). Globally, coal in primary energy will need to decrease by 97% compared to 2010 levels by 2050 to be compatible with 1.5°C pathways, while for China, coal power generation would need to be reduced by approximately 68% by 2030 (below 2010 levels), leading to a phase-out before 2040 (see graph below) (Climate Action Tracker, 2020c; Climate Analytics, 2019).
Controlling and decreasing coal consumption has been a policy objective in China’s National Action Plan on Climate Change, Energy Development Strategy Action Plan (2014–2020), and 2015–2020 Action Plan on the Efficient Use of Coal. The 13th Five Year Plan (FYP) period (2016–2020) introduced more coal-related targets, such as a ban on new coal-fired power plants (which was subsequently lifted in 2018), and a cap of 1,100 GW of installed coal capacity. The forthcoming 14th FYP and power sector plan from the National Energy Administration (NEA) are also expected to heavily feature coal capacity plans (Baxter & Zhe, 2019). To strengthen control on coal consumption, China needs to reinstate its previous ban on new coal-fired power stations.
Despite these efforts, coal consumption rose in 2017, 2018 and 2019, after falling for three consecutive years between 2013 and 2016 (IEA, 2018b; National Bureau of Statistics of China, 2019). In 2018, a loosening of regulations allowed a restart on new coal-fired power plant construction after a two-year freeze, primarily in response to increased industrial electricity demand (Feng, 2018). The China Electricity Council, a national trade association consisting of China’s power enterprises, has recommended raising China’s 1,100 GW coal capacity cap to 1,300 GW in 2030 (CEC, 2019b). This is 290 GW higher than the capacity in 2018 and equivalent to building two large coal-fired power plants a month until 2030 (Myllyvirta, 2019a). The recent growth in coal capacity has largely been driven by increased electricity demand as well as heightened heavy industrial output (Korsbakken et al., 2019).
Coal-fired power capacity continued its expansion by 4% in 2019 compared to the previous year. By mid-2020, China had already permitted more coal capacity than the previous two years combined and had built more than 10 GW of new plants (CEC, 2020). Meanwhile, coal capacity in the pipeline increased by 21% by June 2020 from end-of-year 2019 to 250 GW, which is larger than the entire operating coal fleets of the United States (246 GW) or India (229 GW) (Shearer & Myllyvirta, 2020). China now contains roughly 50% of the world’s coal capacity and coal pipeline and generated more than half (54%) of the world’s coal-fired electricity in the first half of 2020 (Jones et al., 2020; Shearer, 2020).
This is in the face of China’s well-known coal overcapacity issues, a result of guaranteed operating hours and provincial authority to expand coal infrastructure to achieve economic targets, which leads to more than half of coal-power firms being unprofitable and typical plants running less than 50% of their capacity (CEC, 2019a). To exacerbate the issue, in February 2020 national authorities chose to further relax its 2023 Risk Alert (famously known as the ‘traffic light policy’, a document prescribing restrictions on new coal-fired power plants to provinces with high overcapacity ratings) for the third year running (NEA, 2020). This led the NDRC and six ministries to publish new guidance restricting permitting of new coal-fired power plant permits and shutting down illegal or inefficient plants. The State-owned Assets Supervision and Administration Commission of the State Council (SASAC) also implemented trial measures to consolidate coal assets from five of the largest state-owned coal companies in pilot regions to improve the efficiency of plants in December 2019 (SASAC, 2019).
This trend of increasing coal reliance in China is worrying, especially with the development of the 14th FYP fully underway. Increased policy effort is needed to turn China’s coal consumption around and align it with a 1.5°C compatible pathway. In our current policy projections, coal’s share in China’s electricity generation decreases from 59% in 2020 to between 43% and 52% in 2030 (authors’ estimate based on China National Renewable Energy Centre, 2017; IEA, 2019). Out of the world’s largest emitters, China and India still consume a large share of coal in the power sector and will need to decrease coal’s share in electricity generation to 5% to 10% by 2030 to stay sector-aligned with long-term Paris temperature goals. While the USA and EU have been decreasing their coal intensity over time, they are also projected to miss their Paris-compatible benchmark of phasing out coal by 2030 (Climate Action Tracker, 2020c).
Renewable energy targets
In its 13th Five Year Plan period (2016–2020), China set the following targets for non-fossil capacity installed by 2020: 340 GW of hydropower capacity, 200 GW of wind power, 15 GW from biomass and 120 GW of solar power, as well as 58 GW of nuclear capacity (NDRC, 2016). While the hydro, wind, biomass, and solar capacity targets are expected to be achieved, the CAT projects nuclear capacity targets will fall 5 GW short. As it became clear in 2017 that the solar target would be reached much earlier than 2020, the National Energy Administration (NEA) adjusted it upward to 213 GW by 2020. In 2018, the National Development and Reform Commission (NDRC) increased the renewables target for 2030 to 35% of electricity consumption through the Renewable Portfolio Standard (Bloomberg, 2018). This target would be met under the lower bound of the CAT’s current policies scenario.
Following a record growth year for solar PV and wind power installation in 2017, the rate of renewables installations slowed in 2018 and 2019. In the three years combined, China had added roughly 190 GW of solar PV and wind power generation capacity. The primary reason for declining renewable installations is the government’s decision to start phasing out renewable feed-in tariffs in 2018, aiming for zero-subsidy installments by 2021 (Hove, 2020; Stanway, 2019). The decision results from both the cost of renewables falling globally and renewable subsidies mounting a deficit of over CNY 100 billion in China (Hang, 2019). The phase-out of subsidies reflects the government’s continuing objective to reach grid-parity for solar PV and on-shore wind power by 2020 and it has not adjusted the pre-2021 deadline despite large delays in grid connections caused by the pandemic (Baiyu, 2020). As these technologies become more cost-competitive, policymakers have turned their attention to supporting offshore wind and utility-scale solar instead (Hove, 2020).
Growth in renewable energy continues to be a main policy goal for China, with the latest targets for solar and wind each increased to 240 GW of capacity installed (NDRC, 2020; Yan, 2020). The sector was further emphasised in the Government Work Plan and first-ever draft Energy Law released in 2020, which, while stopping short of establishing new renewable targets, reinforced existing goals to increase primary energy shares from non-fossil fuel sources in all levels of government and sends good signals ahead of the 14th FYP. As of mid-2020, solar and wind energy made up roughly 8% of China’s primary energy supply although this is anticipated to rise to 10% to 18% in 2030 under current policies.
Industry accounted for an estimated 28% of energy-related CO2 emissions in China in 2018 (IEA, 2019), with steel and cement output from real estate and infrastructure construction largely responsible for the growing emissions (Myllyvirta, 2019b). While cement and oil product production dropped in the first months of 2020, China’s rebound from the pandemic in these sectors is near complete as the sectors anticipated new economic stimulus for infrastructure construction. Steel production remained more stable throughout the pandemic, which is less surprising given China’s chronic overcapacity of steel in recent years despite waning domestic demand (Myllyvirta, 2020b; S&P Global Platts, 2019). In efforts to boost the manufacturing sector during the pandemic, the government moved to delay the need for companies to meet environmental regulations, and waive electricity bills for large industries to keep production levels high (China - Energy Policy Tracker, 2020). China’s “neo infrastructure” plan has also given a clear signal for continued production of construction materials, with projects until 2025 focusing on digital infrastructure, data centres, transmission lines, and transport. Estimated total investments in the next half-decade range from CNY 10 to 17.5 trillion (Meinhardt, 2020).
This double-down on the growth of a low-carbon service economy is a reinforcement of China’s overarching strategic goal to modernise and improve the quality of its industrial sector, enshrined in the “Made in China 2025” action plan released in 2015. The strategy focuses on intelligent manufacturing in ten sectors, with a priority task of enforcing green manufacturing, and transitioning the labour market towards specialised output focusing on research and development and technological innovation (Cyrill, 2018). China is also set to release the China Standards 2035 plan, which aims to use the technological advantage gained in Made in China 2025 to set domestic and eventually global industry standards for next-generation technologies such as 5G, the Internet of Things (IoT), and artificial intelligence (Koty, 2020). This implies booms in steel and cement production for infrastructure demand, the two largest sources of Chinese industry emissions (Myllyvirta, 2020a). There have been no significant policies to date to attempt decarbonising these two difficult-to-abate sectors, although CCS/CCUS continues to be a priority research area for Chinese industry.
In pursuit of this growing yet decarbonising of industry since the 12th FYP, the government also has a slew of energy efficiency and green growth strategies outlined in documents such as the Programme for the Construction of an Energy-Saving Standard System in 2017, to enable 80% of China’s energy efficiency standards to be on par with international standards by 2020, and the Industrial Green Development Plan (2016–2020), which promotes green supply chains (Gallagher et al., 2019a).
China has further been active in tackling non-CO2 emissions, most notably in regulating hydrofluorocarbon (HFC) emissions from refrigeration and cooling activities embedded in many industrial activities. China’s NDC commits to targeted reductions of HCFC22 production of 35% by 2020 and 67.5% by 2025 below 2010 levels, and also refers to controlling HFC23, which is largely a by-product of HCFC-22 production.
In 2014, the last reported year in the Chinese inventory, F-gases accounted for 2.7% of total Chinese greenhouse gas emissions (Government of China, 2018). As there is not yet any clear regulation that assures implementation of these targets, the CAT has not included these reductions in the current policy projections. China has committed to but not yet ratified the Kigali Amendment to the Montreal Protocol, which includes targets to stabilise nitrous oxide emissions by 2020 and improve capture and utilisation of non-CO2 gases across sectors. It is estimated that implementation of the targets would reduce China’s HFC emissions by more than 200 MtCO2e/year by 2030 compared to current policies (Song, 2019). The commitment to the phase-out of HFCs was re-emphasised in a bilateral agreement between Presidents Macron and Xi in 2019 (IGSD, 2019). Currently, China produces – and consumes – more than 60% of the world’s HFCs.
China’s government uses the term “new energy vehicles” (NEVs) to refer to battery electric vehicles (EVs), plug-in hybrid vehicles (PHEVs), and fuel cell electric vehicles (FCEVs) (Gallagher et al., 2019a). The uptake of NEVs has been increasing rapidly in China, with over 1.25 million electric vehicles sold in 2018, a market share of 4.2% (Irle, 2019). China met its ‘one million (NEVs sold) by 2020’ goal two years early. In 2019, the market share in China grew to 4.9%, with a reported 3.4 million EVs on the road. This is equivalent to 47% of the world’s BEV fleet (up from China’s 45% share in 2018).
However, the growth in NEV sales is experiencing a downturn with the government halving purchase subsidies in 2019 and a further cut of 10% in 2020 (Sun & Goh, 2020; Vincent, 2020), the latest significant policy moves after the phase-out of incentives began in 2016 (due to end in 2020). A massive slump in NEV sales in the second half of 2019 followed while the auto industry was hit even harder after the onset of COVID-19. In February 2020, NEV car sales had plummeted by 80% compared to the same time in 2019 (IEA, 2020b). As a result, the government targeted the NEV sector in its economic recovery packages, extending the subsidy scheme to 2022 and injecting CNY 2.7 billion in BEV charging infrastructure (Cheng, 2020). China already boasts 80% of the world’s public fast chargers, particularly important for dense urban travel. Other components of China’s economic stimulus packages also involve the building of national high-speed rail and local electric public transport systems.
While the sales of other types of electric vehicle modes were also hit in the global pandemic, China is still the world leader in those categories. The uptake of electric buses has also been a priority, with approximately 84% of the world’s electric buses in 2030 expected to be operating in China (BloombergNEF, 2019a; Eckhouse, 2019). More than 30 Chinese cities have announced plans to completely electrify their taxi and bus fleets by 2022 and municipalities involved in the EV Pilot Cities Programme, such as Shenzhen, have virtually already reached these targets (UNEP, 2019). According to the IEA, 25% of the world’s two and three-wheelers in circulation (approximately 350 million) are in China (IEA, 2020b).
It is evident from China’s transport sector policies that low-carbon and electric vehicle fleets remain a priority. As of 2019, the implemented New Energy Vehicle mandate requires automakers to amass credits for the sale of their car fleets, with NEVs making up 10% of annual credits in 2019 and 12% in 2020. The number of credits depends on specific efficiency metrics of the vehicle with high-performance vehicles amassing more credits. This system will also be continually tightened, with credits available per vehicle decreasing while the credit targets (that manufacturers must adhere) increasing annually; auto manufacturers need to reach 14%, 16%, and 18% targets from 2021-2023. China’s top-down policy signals also back up these targets, having raised the national NEV sales target from 20 to 25% in 2025 (Reuters, 2019a). China is also one of 11 endorsers of the EV30@30 initiative, which aims for a 30% EV market share in 2030 (Clean Energy Ministerial, 2019). To limit the global temperature increase to 1.5°C, China’s EV stock will need to make up 35% to 50% of the entire car fleet while the last fossil fuel car will need to be sold in before 2040 (Climate Action Tracker, 2020c).
For conventional petrol and diesel vehicles, China is also developing fuel standards for both light-duty vehicles (LDV) and heavy-duty commercial vehicles (HDV) to start in 2021. For LDVs, the fuel economy standard will be upgraded to a fleet average target of 4L/100km in 2025 (IEA, 2020b).
China has mandatory energy efficiency codes for urban residential and commercial buildings and promotes voluntary energy efficiency codes for rural residential buildings through financial incentives (GBPN, 2018). China’s 13th Five-Year plan includes targets for improving building energy efficiency standards and increasing the proportion of new “green buildings”, which will be particularly important for energy savings in the future, as China’s building stock is projected to continue to expand through 2030.
The government also provides incentives for retrofits of existing buildings to meet today’s more stringent building codes—under China’s 2013 Green Building Action Plan, all eligible buildings in the northern heating zone should be retrofit by the end of 2020 (ChinaFAQs, 2016). China also has two energy-labelling programmes for buildings, and the Three-Star Rating System for green buildings, which also takes into account other environmental considerations. In 2018, more than 2.5 billion m2 of urban and commercial floor space was green-building certified, while China has also launched its Near Zero-emission Building Standard in 2019 (UNEP, 2019).
For compatibility with the Paris Agreement temperature goals, all new buildings will need to be fossil-free and near-zero energy by 2020 and retrofit rates globally should increase to near 5%/year (Climate Action Tracker, 2016)
China’s NDC pledges to increase forested area by 40 million ha by 2020 above 2005 levels, an area slightly larger than the surface area of Norway, and in line with national forest strategies. China has implemented forest conservation policy through the early 21st century, beginning with the National Forest Protection Program, which aims to recover native forests, and has more recently been expanded to ban commercial logging in native forests.
China also has a “compensation fund for ecological benefits,” and implemented the “Ecological Protection Redline” policy in 2017 to protect zones of high ecological importance (Hua et al., 2017). From an ecological perspective, however, some authors are concerned that reforestation programmes have created unintended incentives to cut down native forest to make room for monoculture forest crops (Hua et al., 2018).
In 2020, China revised its Forest Law for the first time in 20 years, with the most significant policy change the implementation of a ban (in effect as of July 2020) on Chinese companies purchasing, processing, or transporting illegal logs (Client Earth, 2020; Mukpo, 2020). China is both the world’s largest importer of legal and illegal logs, with a large portion of its tropical timber imports in 2018 coming from countries with weak governance and accountability indicators, according to reports (Global Witness, 2019). As illegal trade could represent up to 30% of trade in all wood products and be worth up to USD 150 billion a year, this policy change could have a large impact on curbing global deforestation (Interpol, 2019; World Bank, 2019).
China is also a champion of nature-based solutions and is a co-lead of the nature-based solutions coalition for the Climate Action Summit in 2019, which has already received submissions for almost 200 initiatives which could help preserve and sustainably manage global forests. For Paris Agreement compatibility, sinks from the forestry sector should not be used as an excuse to not reduce emissions in other sectors (Climate Action Tracker, 2016).