An ambitious action plan and its geopolitical implications
At the UN General Assembly in December 2020, China's President Xi Jinping shocked the markets by promising to achieve carbon neutrality in just 40 years. The official translation, more precisely, states "We aim to have CO2 emissions peak before 2030 and achieve carbon-neutrality by 2060". This is promising as, up until now, China had only made environmental commitments in the short term, until 2030 at the latest, while it has always avoided targeting a longer-term goal of this magnitude. According to the World Resources Institute, China is the world's largest carbon emitter as well as the most prominent energy financier. Although the country's emissions fell by 25% during the Covid-19 crisis, they had rebounded by June as coal-fired power plants, cement plants, and other heavy industries reopened. China’s emissions had nevertheless increased also in 2018 and 2019, even as the rest of the world started to move away from fossil fuels.
While some may wonder why this timing, at the end of the year, with increasing geopolitical tensions, trade sanctions, and a global pandemic, the response is simple: pulling this off will improve China's competitiveness in the global market. Reaching climate resiliency will turn China into an economic powerhouse by developing an internal circular economy, creating employment, pushing innovation, and improving international relations and sustainability. The rivalry with the US shouldn’t forgotten: in 2014 Mr Xi and then-US President Barack Obama struck a surprise climate-change deal, which became a central component of the Paris agreement signed in December 2015. By addressing this issue, president Xi has not only put much-needed momentum into global climate talk and politics but also presented an intriguing geopolitical question on whether the US will follow or not.
But how can China accomplish this?
How should China address this challenge?
This President's aim will almost certainly require China to restructure its economy; it will undoubtedly be disruptive, but it will also provide numerous economic, social, environmental, and diplomatic opportunities. To achieve carbon neutrality by 2060, China will need to follow the 1.5°C pathway, down from the 2°C set by the Paris Agreement.
At the UN General Assembly in December 2020, China's President Xi Jinping shocked the markets by promising to achieve carbon neutrality in just 40 years. The official translation, more precisely, states "We aim to have CO2 emissions peak before 2030 and achieve carbon-neutrality by 2060". This is promising as, up until now, China had only made environmental commitments in the short term, until 2030 at the latest, while it has always avoided targeting a longer-term goal of this magnitude. According to the World Resources Institute, China is the world's largest carbon emitter as well as the most prominent energy financier. Although the country's emissions fell by 25% during the Covid-19 crisis, they had rebounded by June as coal-fired power plants, cement plants, and other heavy industries reopened. China’s emissions had nevertheless increased also in 2018 and 2019, even as the rest of the world started to move away from fossil fuels.
While some may wonder why this timing, at the end of the year, with increasing geopolitical tensions, trade sanctions, and a global pandemic, the response is simple: pulling this off will improve China's competitiveness in the global market. Reaching climate resiliency will turn China into an economic powerhouse by developing an internal circular economy, creating employment, pushing innovation, and improving international relations and sustainability. The rivalry with the US shouldn’t forgotten: in 2014 Mr Xi and then-US President Barack Obama struck a surprise climate-change deal, which became a central component of the Paris agreement signed in December 2015. By addressing this issue, president Xi has not only put much-needed momentum into global climate talk and politics but also presented an intriguing geopolitical question on whether the US will follow or not.
But how can China accomplish this?
How should China address this challenge?
This President's aim will almost certainly require China to restructure its economy; it will undoubtedly be disruptive, but it will also provide numerous economic, social, environmental, and diplomatic opportunities. To achieve carbon neutrality by 2060, China will need to follow the 1.5°C pathway, down from the 2°C set by the Paris Agreement.
Professor Xiliang, from Tsinghua University in Beijing, has developed a proposal for China in collaboration with MIT. According to him, to achieve its target, China would need to more than double its electricity production, which means that China's nuclear capacity would need to increase 5-fold by 2050 through rapid construction of sites. According to analysts, nuclear energy can supply a more consistent baseload of power than can solar and wind energy. The latest nuclear-plant designs are safe and produce minimal radioactive waste. China will also need to develop or acquire carbon capture and storage (CCS) technologies, which capture carbon dioxide released from burning fossil fuels or biomass before it is released into the atmosphere and store it underground. China's current primary energy mix is 85% fossil fuels, and this number must be flipped by 2060, up from 9% today, to achieve net-zero carbon emissions.
In line with this, there are several markets that will need to change: currently, electric cars and batteries have a market penetration rate of about 5%, but analysts expect this to grow to 50% by 2030. Moreover, for the next 40 years, the number of renewable energy installations in the power sector would increase 2.5 times per year. Going forward, the transition to biodegradable plastic must be hastened, and investments in clean energy must be boosted. Clean energy storage currently accounts for 7% of the market; to reach the necessary capacity of 64% by 2060, an investment of 500 billion renminbi per year will be required.
The final crucial point is that of coal: many researchers, in fact, think that China should cease building new coal-fired power plants as existing plants will reach the end of their life cycle before the neutrality deadline. A step in a favorable direction was certainly characterized by the publication of a new green bond standard draft in 2020, given it mostly excluded “clean coal”. Nevertheless, there are still improvements to be made on this side in order to further align it with international standards. Finally, a challenge for the Chinese government will be to consider the economic stability and well-being of the more than 3.5 million workers in the coal mining industry.
In line with this, there are several markets that will need to change: currently, electric cars and batteries have a market penetration rate of about 5%, but analysts expect this to grow to 50% by 2030. Moreover, for the next 40 years, the number of renewable energy installations in the power sector would increase 2.5 times per year. Going forward, the transition to biodegradable plastic must be hastened, and investments in clean energy must be boosted. Clean energy storage currently accounts for 7% of the market; to reach the necessary capacity of 64% by 2060, an investment of 500 billion renminbi per year will be required.
The final crucial point is that of coal: many researchers, in fact, think that China should cease building new coal-fired power plants as existing plants will reach the end of their life cycle before the neutrality deadline. A step in a favorable direction was certainly characterized by the publication of a new green bond standard draft in 2020, given it mostly excluded “clean coal”. Nevertheless, there are still improvements to be made on this side in order to further align it with international standards. Finally, a challenge for the Chinese government will be to consider the economic stability and well-being of the more than 3.5 million workers in the coal mining industry.
The target set by President Xi will necessitate major changes in China's energy mix, economic structure, and technological progress, and it will represent a major investment for the country. A recent study carried out by Tsinghua University Institute for Climate Change and Sustainable development, in fact, estimated that the investment under the 1.5C° would approximately amount to some $15 tn ( CNY 178 tln in the graph) between 2020 and 2050, approximately 2% of China’s GDP. To provide terms of reference, the Marshall Plan was $135 billion in today's value. However, China has also become the largest Green Finance market with approximately 11tln yuan in green credit and 1 trillion yuan in green bonds by 2020, with key sectors being mainly green transportation, emerging industries and renewable energy.
China's new goals are certainly ambitious and targeting them will be a significant challenge. However, the upsides will benefit both China's overall competitiveness from an international standpoint and increase living standards for more than a billion people.
Chiara Benedetta Allievi
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China's new goals are certainly ambitious and targeting them will be a significant challenge. However, the upsides will benefit both China's overall competitiveness from an international standpoint and increase living standards for more than a billion people.
Chiara Benedetta Allievi
Want to keep up with our most recent articles? Subscribe to our weekly newsletter here.