China’s climate ambitions

China has the world’s largest CO₂ footprint by far. Without the Middle Kingdom on board, little (or less than is needed) can be done in the fight against global climate change. But whoever has been waiting for China to take over a sustained leadership role in decarbonizing our planet will have to keep on waiting. The environmental goals in China’s 14th five-year plan, at any rate, are hardly ambitious. But this doesn’t mean that we should completely write off China’s climate policy (yet).

The 14th five-year plan is not yet truly “green”

Twice each decade, the government of China sets economic, societal and environmental goals for the coming five years. In the wake of President Xi Jinping’s surprise announcement last autumn that China intends to reduce its carbon dioxide emissions to net-zero by 2060, international observers eagerly awaited the release of more specific details on how this (ambitious) target is to be reached. But whoever had been hoping to see sweeping measures put into place in China’s 14th five-year plan (for 2021 through 2025) presented in early March was let down for the time being. The government’s motto at least at first (and even second) glance tends to be “business as usual” – there were no significant traces of truly aggressive climate targets in the five-year plan. The environmental protection goals set by China’s government are similar to or only marginally tighter than the ones in the previous five-year plan from 2016. For example, CO₂ emissions per unit of economic output are to be lowered by 18%, the same rate of reduction as in the previous five-year cycle. However, since China’s economy looks set to continue expanding at an average annual growth rate of around 5% over the next five years, this target actually implies a sustained aggregate increase in CO₂ emissions by around 1% per annum until 2025. China’s stated goal of boosting the share of renewable energy from 15% to 20% of the country’s energy mix is also on the conservative side considering that China doubled its installed wind and solar power capacity last year. Even if this thus perhaps suggests that Beijing has deliberately set readily achievable goals, the latest proclamations present little new information and are somewhat disappointing from an environmental protection standpoint. One of the few reforms with greater substance is the government’s pledge to “practically eliminate” days with exceptionally severe air pollution.

Gigantic footprint

China accounts for 30% of global CO₂ emissions

Countries’ share of global CO₂ emissions

Sources: Goldman Sachs, Kaiser Partner Privatbank

With a 30% share of global emissions, China has by far the world’s biggest CO₂ footprint.

It won’t work without China

If the international community seriously wants to meet the goals of the Paris climate agreement and limit global warming by 2030 to 2 degrees Celsius, it really needs to take swift action. The United Nations calculates that to reach that target, global greenhouse gas emissions would have to be cut 45% below 2010 levels by 2030. An interim UN report published in February states, however, that the emissions reduction targets of 75 countries that have already made binding commitments to the Paris accord only add up to a proverbial drop in the bucket and are nowhere near sufficient. The only way to close this gap is for China to commit to taking more ambitious (and faster) steps because China, which accounts for 30% of global emissions, has the world’s biggest CO₂ footprint by far and thus holds the most direct leverage to reduce world emissions. China’s actions also have indirect repercussions. If China’s net-zero target by 2060 is not credible, this lowers the pressure on other emerging economies like India and on raw-material exporters like Australia to likewise “green” their energy mix and rethink their economic structure.

Last year alone, 73 gigawatts of new coal-fired power plant capacity was put into operation throughout China, three times more than in the rest of the world combined.

Back at full steam

China’s CO₂ emissions resurge to a new high after dipping due to the pandemic

Annual growth in China’s CO₂ emissions

Sources: carbonbrief.org, Kaiser Partner Privatbank

Still coal-dependent

But why aren’t China’s climate targets more ambitious? After all, the Middle Kingdom could ecologically and economically benefit from an energy revolution orchestrated by the state. Studies assert that it would be technologically feasible to top out CO₂ emissions by as early as 2025, and while prices for wind and solar energy are falling, more than 40% of China’s coal-fired power plants are operating at a loss. The main answer to the question above is coal. China remains heavily dependent on this brown (or black) commodity, which continues to be the country’s most important source of energy, accounting for over 60% of its energy supply. Last year alone, 73 gigawatts of new coal-fired power plant capacity was put into operation throughout China, three times more than in the rest of the world combined. Many provinces of China, particularly those in the country’s central and western regions, are energy-dependent on coal and economically dependent on “dirty” industries such as steel, cement and aluminum. The manufacturing sector, which continues to account for a large 39% of China’s economic output (compared to 18% in the USA), is still rudimentary in many places and is a major employer for the population. This accordingly makes it difficult to engineer a green transition in those regions, in stark contrast to the megalopolises on China’s east coast, which are already highly technologized consumer-oriented societies today. China’s Ministry for Ecology and Environment, whose job it is to put the president’s climate ambitions into action, has thus far given a lot of deference to the provinces slowing a green transition, but the pressure on the climate dawdlers looks destined to increase in the years ahead.

Dependent on coal

China continues to invest in dirty energy

Net change in global coal-fired power plant capacity, in gigawatts

Sources: Global Energy Monitor, Kaiser Partner Privatbank

Waiting for the “climate plan”

Even though the 14th five-year plan was a letdown for now from a global climate standpoint and brought home the fact that China is not an express train in the fight against climate change, we nonetheless should stay objective (and optimistic), because once the giant stirs into motion, it is hard to stop it. The next opportunity for China to give fuller expression to its climate ambitions and to flesh them out with technical details will come in the second half of this year when China unveils its first five-year plan for climate change. Stricter measures such as a cap on CO₂ emissions or a moratorium on new coal-fired power plants may then be on the agenda for the first time. Unless further efforts are made, it will likely be hard for China to reach its self-set interim goal of peaking its carbon dioxide emissions by 2030.

China also looks set to step up the pace because international pressure on Beijing is mounting. Now that new US President Joe Biden has signed an executive order to rejoin the Paris climate agreement, the USA and Europe – the largest economic powers (and climate offenders) alongside China – are back on the same page concerning the need for stricter emissions cuts. China, which views itself as a leader of the global climate dialogue, risks falling behind and could find itself forced to undertake further commitments. Moreover, the US administration and the EU Commission are mulling the introduction of a marginal carbon dioxide tax that would target imports from countries that are lagging behind on climate protection measures. Without stricter self-commitments, China eventually could find itself in the West’s trade crosshairs in yet another category.