Current Policy Projections
In the CAT current policy projections, China will reach a GHG emissions level (excl. LULUCF) of between 13.4-13.7 GtCO2e/yr in 2020 and 13.7–14.7 GtCO2e/yr in 2030. This is an increase in total GHG emissions of 5%–7% above 2015 levels by 2020 and 7%–15% by 2030.A total of 9.3–9.6 GtCO2e/yr in 2020 and 9.5–10.5 GtCO2e/yr in 2030 are energy-related CO2 emissions.
This means that according to our assessment, China will meet its 2020 pledge and its NDC targets, but still be above current emissions levels. China’s chief climate negotiator, Xie Zhenhua, has expressed the opinion that China could meet its 2030 peaking targets early, reflecting the conclusions of other studies (Green and Stern, 2017; Xu, Stanway and Daly, 2018; Gallagher et al., 2019b; Wang et al., 2019). CAT analysis confirms that, based on current GDP projections, China is indeed likely to meet the carbon intensity target of its 2030 pledge early.
China’s CO2 emissions are estimated to have risen 2.3% in 2018 and as much as 4% over the first half of 2019 due to increased fossil fuel combustion and an uptick in cement production (Korsbakken, Andrew and Peters, 2019; Myllyvirta, 2019b). However, the trend across the year is uncertain as China’s emissions had declined drastically in the latter half of the year in both 2017 and 2018 (Korsbakken, Andrew and Peters, 2018, 2019).
China is implementing a range of policies in most sectors. Most significant is its commitment to limit coal use, and a strong increase of renewable and low-carbon energy. In December 2017, China announced a new national emissions trading system, which will initially apply only to the power sector, but may be expanded to other sectors in the future. The overall emissions impact of the system is not yet clear (Jotzo et al., 2018), but the first trades are expected in 2020 (Carbon Pulse, 2019). However, there are reports that China may avoid setting an absolute cap on CO2 when launching the scheme and instead adopt an intensity-based approach, which would decrease the policy instrument’s effectiveness in reducing emissions (Reklev, 2019).
China’s actions abroad will also have an important impact on future global greenhouse gas emissions, also due to the financing and building both fossil-fuel and renewables infrastructure worldwide through initiatives like the Belt and Road Initiative, which involves 126 countries that could account for as much as 66% of global carbon emissions in 2050 (Jun et al., 2019).
Since 2014, China has invested over five times more in Belt and Road countries in developing coal-fired capacity than wind and solar capacity (Reuters, 2019). From 2014-2017, 91 percent of loans from the six major Chinese banks financing the initiative were tied to fossil fuel projects (Zhou et al., 2018). Furthermore, of all coal plants under development outside of China, one quarter, or 102 GW of capacity, have committed or proposed funding from Chinese financial institutions and companies (Shearer, Brown and Buckley, 2019). While 2018 marked the first year in four decades coal capacity outside of China declined (by 8.1 GW) due to retiring and decommissioning, China increased its coal capacity by 42.9 GW over the same period, thus raising the global coal fleet (Shearer, Yu and Nace, 2019). China’s continuing dedication to the fuel domestically and abroad is concerning.
Controlling coal consumption
In 2018, coal accounted for 62% of China’s total primary energy supply, and 66% of its electricity production. In that year, China accounted for 52% of the world’s primary coal energy supply (IEA, 2019b). China’s actions on coal are therefore key to limiting global coal consumption: 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, unless large scale carbon capture and storage technology becomes available (IPCC, 2018). China’s increased coal consumption and development in recent years is inconsistent with the Paris Agreement. In Paris Agreement compatible pathways for non-OECD Asia, coal power generation would need to be reduced 63% by 2030 [below 2010 levels], leading to a phase-out by 2037 , meaning that no new coal fired power plants can be built as of now (Climate Analytics., 2019). This was confirmed in the recent IPCC report (IPCC, 2018).
Controlling and decreasing coal consumption is 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 cut in production capacity of coal (Enerdata, 2016). These policies aim to alleviate China’s overcapacity in the coal industry. The forthcoming 14th FYP and power sector plan from the National Energy Administration (NEA) is also expected to heavily feature coal capacity plans (Baxter and Zhe, 2019). To strengthen control on coal consumption, China needs to reinstate its previous ban on new coal-fired power stations.
To combat air pollution, China is shutting down some coal-fired power plants, for example in Beijing, where the last remaining coal fired power plant was shut down in 2017 and replaced with gas power plants (Xinhua, 2017). China’s plan for continuing to curb air pollution between 2018 and 2020 extends air pollution targets to a wider range of cities (Feng, 2018a). The Chinese government is also pushing a switch from coal to gas in homes and factories, and gas consumption rose 15% in 2017 over 2016 levels (Chen, 2018). China’s National Development and Reform Commission (NDRC) has issued targets to cut annual coal production capacity by 150 million tonnes in 2018 in its government work report. However, this may not lead to immediate reductions in output, due to overcapacity in the sector (Platts, 2018).
Despite these efforts, coal consumption rose again in 2017 (0.3%), 2018 (1%) and by 3% between the first half of 2018 and first half of 2019, after three consecutive years of decreases between 2013 and 2016 (IEA, 2018b; National Bureau of Statistics of China, 2019). Some plants in China are being retrofitted to use coal more efficiently (NEA, 2018). In 2018, a loosening of regulations allowed a restart on new coal plant construction after a two-year freeze, primarily in response to increased industrial electricity demand (Feng, 2018b). A recent analysis found that 245 GW of coal capacity is under construction in China (28 GW of which started in 2018) (Shearer et al., 2019; Shearer, Yu and Nace, 2019).
The China Electricity Council, a national trade association consisting of China’s power enterprises, has recommended increasing China’s 2020 1,100 GW coal capacity cap to 1,300 GW in 2030 (China Electricity Council, 2019). This is 290 GW higher than the capacity in 2018, and equivalent to building two large coal power plants a month until 2030 (Myllyvirta, 2019a).
The growth in coal capacity seen recently has largely been driven by increased electricity demand as well as heightened heavy industrial output (Korsbakken, Andrew and Peters, 2019). Increased policy efforts will be needed to turn China’s coal consumption around and align it with a 1.5°C compatible pathway. In our current policy projections (see Assumptions below), coal’s share in China’s total primary energy demand decreases from 62% in 2018 to between 41% and 47% in 2030 (China National Renewable Energy Centre, 2017; IEA, 2019b). As a result, and assuming growing energy demand, CO2 emissions could either flatten or continue to rise.
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). As it became clear during 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. Investment in renewable energy in China in 2017 reached $126.6 billion USD, accounting for 45% of global investment in renewables (Frankfurt School-UNEP Centre/BNEF, 2018).
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. The plan would also increase 2018 and 2020 non-hydro power consumption targets for some provinces (Bloomberg News, 2018).
Following a record growth year for solar PV installation in 2017, the Chinese government reduced subsidies for solar installations in 2018, aiming for zero-subsidy renewable instalments by 2021, which slowed the rate of installations in 2018 and over the first half of 2019 (Stanway, 2019). The NEA has since confirmed plans to relax the subsidy cuts in 2019, injecting 3 billion yuan for public solar subsidies (Hall, 2019). The cautious approach to phase out subsidies reflects the government’s continuing objective to reach grid-parity for solar and wind power by 2020, albeit with renewable subsidies mounting a deficit of over RMB 100 billion (Hang, 2019).
Looking farther into the future, Bloomberg New Energy Finance projects that in 2050, China will have 1 TW of solar PV and 1 TW of wind power installed (Bloomberg NEF, 2018). Globally, renewables will need to supply 70–85% of electricity by 2050 to be compatible with a 1.5°C compatible pathway.
Industry accounted for an estimated 28% of energy-related CO2 emissions in China in 2018 (IEA, 2019b), with increased steel and cement output from real estate and infrastructure construction largely responsible for the growing emissions (Myllyvirta, 2019b). Crude steel output, for example, rose 3% between 2017 and 2018, despite provisions in the 2018 government work plan to cut production capacity by 30 million tonnes in 2018, while cement production increased 7% between 2018 and 2019 (Platts, 2018; Worldsteel Association, 2018; Myllyvirta, 2019b).
China has an 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 10 sectors, with a priority task to enforce green manufacturing, among eight other priorities.
The programme has drawn international criticism, including from the United States, with concerns that subsidies under the programme violate World Trade Organisation rules, and that the Chinese government is acquiring foreign technology firms and intellectual property (Congressional Research Service, 2019). In light of this criticism, the Chinese government backed away from using the name “Made In China 2025” in early 2019, while still emphasising the importance of “high-quality manufacturing” (Harada, 2019).
In pursuit of these targets and China’s energy intensity targets, the government implemented the Programme for the Construction of an Energy-Saving Standard System in 2017, with a goal of enabling 80% of China’s energy efficiency standards to be on par with international standards by 2020. China also has an Industrial Green Development Plan (2016–2020), which promotes green manufacturing and green supply chains (Gallagher et al., 2019a).
In 2014 and 2015, China began to tackle non-CO2 emissions, most notably hydrofluorocarbon (HFC) emissions, which are some of the world’s most potent greenhouse gases. 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). The National Development and Reform Commission (NDRC) is investing in demonstration projects for the controlled disposal of HFCs in industry. Further, it is setting up a reporting and monitoring instrument for F-gases for industrial companies (ESCO Committee of China Energy Conversation Association 2015). The NDC document also 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.
As there is no clear regulation that assures implementation of these targets, we have not included these reductions in the current policy projections. However, they are an important stepping stone towards tackling this sector (EIA 2015). China has committed to ratifying and implementing the Kigali Amendment to the Montreal Protocol, including 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/a by 2030 compared to current policies (Song, 2019).
However, in stark contrast to efforts to reduce HFCs, the widespread use of CFC-11, a globally banned ozone depleting substance that is over 4,000 times more potent than CO2, has recently been identified and reported in China by the Environmental Investigation Agency, a UK based non-profit, suggesting enforcement challenges (Environmental Investigation Agency, 2018).
The uptake of electric vehicles is increasing rapidly, with over 1.25 million electric vehicles (EVs) sold in China in 2018, with a 2018 market share of 4.2% (Irle, 2019), ensuring the ‘one million by 2020’ goal was met two years early. In 2018, 80% of the world’s electricity demand for EVs came from China (IEA, 2019a).
The uptake of electric buses in China is even more rapid, with approximately 84% of the world’s electric buses in 2030 expected to be operating in China (Bloomberg NEF, 2019a; Eckhouse, 2019). More than 30 Chinese cities have announced plans to completely electrify their taxi and bus fleets by 2022 (UNEP, 2019).
China has both subsidies and tax exemptions that apply to new energy vehicles (NEVs), a term used by the Chinese government to refer to battery electric vehicles (BEVs) and plug-in hybrid vehicles (PHEVs) , and fuel cell electric vehicles (FCEVs) (Gallagher et al., 2019a). As of 2019, automakers will need to amass credits for the sale of NEVs, making up 10% of annual sales in 2019 and 12% in 2020. Manufacturers could earn multiple credits for a single vehicle, meaning that the actual percentage of NEV sales could be lower than 10% of annual sales in 2019 and still comply with the standards (Shirouzu and Jourdan, 2017).
NEVs are a priority sector in China’s policy initiative to comprehensively upgrade Chinese industries, formerly referred to as the “Made in China 2025” initiative. For the passenger auto industry, the strategy foresees fuel consumption standards of 5 ltrs/100 km in 2020, one million units of NEVs sold in 2020, and world leadership in batteries and electric motors (China Daily, 2015). Since the one million NEVs target was already achieved in 2018, China is currently considering updating new goals to have 60% of all auto sales be NEVs by 2035 (Bloomberg News, 2019). To limit global temperature increase to 1.5°C, the last fossil fuel car will need to be sold before 2035 (Climate Action Tracker, 2016).
The China 6 fuel and emissions standards for passenger vehicles will go into effect on July 1, 2020, and will be one of the most stringent emissions standards in the world (Gallagher et al., 2019a). China is also developing fuel standards for heavy duty commercial vehicles to start in 2021, with the overall goal of reducing fuel consumption from these vehicles by 15% below 2015 levels. When fully implemented, these standards will be in line with standards in the US, Canada, Japan, and EU. These emissions standards apply to atmospheric pollutants like NOx and particulate matter, but do not regulate CO2 specifically (Yang and He, 2018).
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 compared to 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, Xu and Wilcove, 2017). Reforestation and afforestation efforts have led Chinese forest cover to increase from 12% of the land area in 1981 to 21.4% in 2013, according to national statistics. 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).
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, 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).