China’s road to carbon neutrality by 2060 will be long and bumpy

Last month at the UN general assembly, President Xi Jinping surprised the world by announcing China’s commitment to achieve carbon neutrality by 2060. His unexpectedly forthright speech received mixed responses and raised many unanswered questions about what carbon neutrality means and how China will get there.

A boost for global efforts to galvanise action on the climate crisis

On the one hand, the new pledge can be seen as inspirational. China is the first country among large emergent economies that has made a specific commitment on carbon neutrality, and the targeted deadline is not very far behind many advanced economies. Second, Xi’s announcement indicates that China’s determination to engage in global efforts to combat climate change is not affected, at least on the surface, by the rapidly deteriorating diplomatic relations between China and major Western countries. This is a big relief for anyone concerned about our warming planet, as China’s emissions have exceeded the US and the EU combined, and any global climate treaty without China’s active involvement is doomed to fail.

Scepticism and political posturing

On the other hand, there is strong scepticism over Xi’s grand promise. The narrative of the statement could be construed as another assertion of China’s ambition to take up a greater role in various global governance institutions including the Paris Climate Agreement. China’s strategy seems to intentionally display a sharp contrast to the Trump administration’s approach to climate change. This could in part be to help rescue its dropping international image since the Covid-19 outbreak. Yet uncertainties are high regarding the future role these two superpowers will have in the Climate Accord, particularly as the US democratic presidential candidate Joe Biden has already pledged to re-join the Paris Agreement. How world’s two biggest greenhouse gas emitters would interact under the current climate framework is unknown. But one thing is clear; that in the foreseeable future the once productive bilateral cooperation on climate change under the Obama administration may never come back.

China’s coal market: both an opportunity and a threat

China’s current measures on climate change can be described as a bizarre mix of miraculous achievements and tremendous setbacks. China has made substantial progress in many mitigation areas, including reducing its heavy ambient air pollution level around the capital city over the past ten years, and developing the largest wind and solar energy capacities worldwide in the past two decades. However, its fossil fuel industries, particularly the coal-fired power sector, have been resurging in the past few years under the protection of local government. China’s previous commitment of reducing carbon intensity by 45 per cent on 2005 levels was achieved in 2017, three years before the deadline of 2020. A crack-down on the country’s most inefficient energy practices and polluting industries, such as bulk coal burning in winter, has contributed to successes in reducing urban air pollution. Yet, as a result, China’s next medium-term climate target – peaking emissions by 2030 – now appears to be rather slack, leaving ample room to add more generation capacity from coal. We are currently seeing unprecedented lobbying by energy utilities and coal-abundant provinces in this critical moment of drafting China’s 14th five-year plan (2020-2025). Everyone knows this could be the ‘last train’ for China’s coal power industry.

Apart from vested political interests, phasing out coal promptly in China is indeed very challenging due to both technological and social concerns. In the long run, whether renewable energies like wind and solar can be elevated as baseload (both reliable and resilient) power generation sources depends on two technological breakthroughs: 1) successfully transforming coal-fired power stations into peak-load adjustment power plants (generally running only in peak demand), and 2) significant improvement of energy storage technology. The Chinese government has invested tremendously on both fronts, particularly with new digital technologies like artificial intelligence, machine learning and big data in the past few years. However, its progress still lags behind the massive growth of renewable energy capacity, leaving persistent and significant curtailments on renewable energy generation.

Phasing out coal would also inevitably cause massive job losses, which are most likely to happen on coastal areas where coal power capacities are to be phased out first. Fortunately, these are the more economically advanced areas and resilient to such impact, but inland provinces, particularly those coal abundant ones, will be affected eventually. How to prevent some of these areas becoming China’s ‘rust belt’ will be a significant development challenge in the next 20 to 30 years. Most of the Chinese coal power plants are owned by large state owned enterprises (SOEs) who are also engaging actively in the fast growing renewable energy sectors. Therefore, it is hoped that at least some of the laid off workers from ‘sunsetting’ sectors can be transferred into ‘sunrising’ ones smoothly.

Impacts beyond borders

China’s new climate pledge may have impacts beyond its border, particularly in relation to its growing overseas energy activities around the Belt and Road Initiatives. There have long been concerns that some of above mentioned economic and social pressure on fossil fuel industries within China will inevitably be leaked to Belt and Road Initiative (BRI) countries. In the past decade there has been a dramatic increase in newly contracted coal power plants in major BRI areas constructed by Chinese SOEs. However, since 2018 such trends seem to have slowed down with state finance for coal power plants shrinking according to Boston University’s China Global Energy Finance database. Chinese officers always insist that most fossil fuel projects were proposed by the host countries and that China only agreed to construct the most needed ones, rejecting many fossil fuel proposals in the process. The Beijing based Asian Infrastructure Investment Bank (AIIB) recently announced that it will stop financing any projects that are functionally related to coal, including roads and grid infrastructures that connect to coal power plants. Yet whether such policies will be assimilated by other major Chinese state banks, which take the lion’s share of current Chinese overseas energy finance, remains unknown. In the foreseeable future, we may see China continue to invest in both fossil fuel and renewable energy projects along the BRI with gradual tilting towards renewables, just as they did domestically.

When China joined the Kyoto Protocol in 1998, Beijing was able to use international cooperation and commitment as a powerful narrative to coerce local officers and SOEs to comply with various emission reduction targets in a top-down fashion. Nowadays, though, global responsibility or a ‘community with a shared future of mankind’ (as used in Xi’s speech), is mainly used as a term to entice foreign audience rather than pressing domestic changes. Yes, president Xi’s strong ambition to combat climate change is sincere and clear, but its implementation will be a long and bumpy road for China with intense internal struggles that are mostly obscured and unaffected by outsiders.

Wei Shen is an IDS Research Fellow. His research forms part of IDS’ China International Development Research and Mutual Learning Hub. China’s role in renewable energy development and green financing is one of the China Hub’s core thematic research areas.  

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