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China Briefing: 14FYP energy plan; More plans on energy storage and hydrogen; China’s emissions analysis

China Briefing
Welcome to Carbon Brief’s China weekly digest. 
We handpick and explain the most important climate and energy stories from China over the past seven days.

Snapshot
This week has been a busy week for China’s climate policy watchers. On Tuesday, Beijing quietly dropped its 14th five-year plan (FYP) for the energy sector, a much-anticipated document that sets the tone for the industry’s development from 2021 to 2025. The plan came on the same day as China’s vice premier stressed the importance of the “clean and efficient” use of coal. 
On Monday and Wednesday, the central government published two other national-level plans on energy. The former serves as what has been described as “top-level” guidance for energy storage for the next five years. The latter lays out a roadmap for the hydrogen industry from 2021 to 2035. 
Elsewhere, Timothy Goodson – an energy analyst at the International Energy Agency (IEA) – has evaluated the causes of China’s carbon dioxide (CO2) emissions jump over the past two years for Carbon Brief. An IEA report found that China was the main driving force behind a global emissions “rebound” past pre-pandemic levels.
Key developments
China releases energy roadmap for next five years
WHAT: China’s central government published the long-awaited 14FYP for the energy sector on 22 March, laying out a general direction – as well as specific tasks and goals – for the energy system for the next five years. The overarching objective of the plan is to “accelerate” the development of a “modern energy system” – which, according to a government spokesperson, stands for a “clean, low-carbon, secure and highly efficient” energy system. The plan was jointly published by the National Development and Reform Commission (NDRC), the state economic planner, and the National Energy Administration (NEA), the state energy regulator. 
KEY POINTS: The document doubles down on recent government instructions of enhancing energy efficiency by setting quantitative targets on energy production (especially for oil and gas) and reasserting the role of coal and coal power. It also underscores the urgency of speeding up the “low-carbon” transition to adapt to the “large-scale” development of renewable energy. A few key targets are missing, including caps for total energy consumption and coal consumption, as well as projected total electricity consumption. However, Carbon Brief understands there are two new targets: one requires the ratio of non-fossil power generation to reach “about” 39% in the total power generation by 2025; the other stipulates that electric power account for “about” 30% of final energy consumption by 2025. (According to China Electricity Council, a state-approved trade association, non-fossil power generation made up for 34.6% of the total power generation by the end of 2021.)
MAIN GOALS: The document lists five main goals. To summarise, it stipulates that the country should strive towards “more safe and solid” energy security, achieve “remarkably effective” energy transition, “significantly” raise energy efficiency, “obviously” enhance innovation capabilities and “continuously” improve general energy service levels. 
TARGETS: The plan commands that by 2025, China should have the “comprehensive energy production capacity” of 4.6bn tonnes of standard coal equivalent (tce) annually as well as producing 200m tonnes of oil and more than 230bn cubic metres of gas a year. (These figures are not new. This government document from last December explained how they were calculated. It also said that the “comprehensive energy production capacity” means the production capacity of primary energy including coal, oil, gas and non-fossil energy.) It notes that the total installed capacity for power generation should reach “about” 3,000 gigawatts (GW), which Bloomberg described as “a huge increase”. 
MORE TARGETS: The plan repeats several key objectives from the overall 14FYP and China’s updated nationally determined contribution (NDC): an 18% reduction target for CO2 intensity (the CO2 emissions per unit of GDP ), a 13.5% reduction target for energy intensity (the energy consumption per unit of GDP) and an increase to “about” 20% for the share of non-fossil energy in total energy consumption, all from 2021 to 2025. 
NAME: One of the biggest differences between this five-year energy plan and its previous incarnations is in the name. Instead of being called the “plan for energy development”, the latest document is titled the 14FYP for a “modern energy system”. A spokesperson at the state energy regulator said the name change indicates that the government has recognised the necessity of accelerating the development of a “low carbon, intelligent, diversified and multi-polarised” energy system to follow the global trend and adapt to a modern economic system. In explaining the definition of a “modern energy system”, the spokesperson pointed to previous instructions from China’s president Xi Jinping, who had urged for a “clean, low-carbon, secure and highly efficient” energy system. Xi issued the orders in two high-level meetings, one in January and one in mid-March
13FYP VS 14FYP: A blog post penned by Yin Ming, a Chinese energy market analyst, has compared the new plan with the 13FYP energy plan. The piece said that the new plan has not set a target for the “domestic self-sufficiency” rate for energy – a move it said would enable the country to stock up on international energy commodities amid “uncertain” global market conditions. It also noted that the plan has set a target for the production capacity – instead of the production – of primary energy to ensure that energy supply could be boosted quickly in case of global shortages. Calculations by researchers from China-based Guosheng Securities showed that China’s total energy consumption is projected to grow to 5.92bn tce during the 14FYP period compared to 4.98bn tce in 2020 (a 19% increase). (The 13FYP for energy capped the total energy consumption at “within 5bn tce”.) Guosheng also estimated China’s non-fossil energy consumption to increase from 0.79bn tce in 2020 to 1.18bn tce by 2025 (a 49% rise but still only sufficient to cover 41% of demand growth overall).
ENERGY SECURITY: The plan calls for an enhancement in the “stability and security” of energy supply chains. Specifically, it demands an increase in the “supply capabilities” of oil and gas (China largely relies on imports for both). It stresses coal’s role in “ensuring the basic energy needs” and highlights coal power’s importance in supporting the power system and providing flexible peaking services to help raise the share of renewables in the power grid. It also instructs the nation to increase its capabilities in storing gas. 
ON COAL: On Tuesday – the same day as the publication of the 14FYP energy plan – China’s vice premier, Han Zheng, convened a high-level meeting in Beijing to emphasise the “clean and efficient” use of coal, reported Xinhua. According to the state news agency, Han – who also leads China’s leaders group on hitting the “dual-carbon” targets – stressed the “extreme importance” of ensuring national energy security under “new circumstances”. The newswire said that Han urged the country to “give full play to coal’s role” in meeting the nation’s “basic energy needs”. He said “clean and efficient” use of coal was “an important means” to achieve the carbon peaking and carbon neutrality goals. (Carbon Brief has explained Han’s role in China’s climate efforts.) But TransitionZero – a London-based “climate analytics firm” – said on Twitter that China’s “major ramp-up of coal mining…will deal a blow to its near-term climate performance” and “is not a sustainable solution for energy security”. Read its thread
MEDIA REACTION: According to Bloomberg, the energy plan intends to increase China’s power generating capacity by 800GW – or “about twice the size of India’s entire power fleet” – between 2021 and 2025. Reuters reported that China aims to “increase renewable power, maintain crude oil output and boost natural gas production”. Han Xiaoping – chief information officer of China Energy Net, an “energy information and consulting service provider” – told the Chinese financial outlet National Business Daily that the plan is “very important” and will “impact [China’s] future energy development profoundly” as the next five years represent a key window for energy restructuring ahead of China’s targeted timeline for carbon peaking. The Hong Kong-based South China Morning Post focused on the plan’s wording that China is in a “critical stage” of ensuring energy security when new and old risks become “intertwined”. Shanghai-based Sixth Tone reported that China “seeks to minimise its reliance on fossil fuels and adopt more forms of renewable energy”.
TWITTER REACTION: Yan Qin – a carbon analyst at Refinitiv Carbon – said the headline figures were “largely in line” with previous announcements, stressing a gradual transition towards China’s climate goals as well as an emphasis on energy security, following power cuts last year. While there are no specific targets for how many gigawatts (GW) of wind, solar or coal will feature within the 800GW power generation growth goal, independent journalist Liu Hongqiao (formerly of Carbon Brief) calculated that there is 442GW unaccounted for after previous nuclear, hydropower, wind and solar announcements. (Earlier this year, China Briefing reported that major state-owned power firms planned to build 600GW of wind and solar during the 14FYP period.) Liu also noted that “for the first time” in a domestic policy document, the new plan features Xi’s announcement about not building new overseas coal power. According to Lauri Myllyvirta – lead analyst at the Centre for Research on Energy and Clean Air – “whether these clean energy additions are sufficient to peak emissions will depend entirely on energy demand growth, which in turn depends above all on economic policy”.
Q&A
China Briefing asks: What is the significance of China’s 14FYP energy plan?
DR YANG MUYI – senior electricity policy analyst of Asia at Ember – said: “The plan has set a very clear direction: China’s energy transition has moved from its initial stage to a breakthrough phase. Its further progress requires not only clean energy uptake. More importantly, the whole energy system also needs to be reconfigured to accommodate the changing energy mix. Against such a background, the role of coal power has also become clear: it will not simply be abandoned, but to be used as a connecting link between the old and new systems. In my view, the government’s focus for the next five years is to adjust the energy system – in addition to the energy mix – which in itself is a more complex and unpredictable process. It is, therefore, understandable why the government has not further scaled up its policy targets for energy decarbonisation. This would give some leeway for the country to configure its energy system, especially in the backdrop of substantial external uncertainties.“ 
JIN BOYANG – senior analyst for energy transition at Refinitiv – said: “[The plan] is significant since it is the master plan for energy development during the 14FYP. In the plan, there’s a special column about achievements in the energy sector during the 13FYP. If you take a closer look, you will notice that most of the achievements are in line with the targets proposed in the same plan for 13FYP five years ago. Judging from that, we can tell that China is quite serious about its plan on energy and the Chinese government will spare no effort to materialise the desired targets. In the plan, the NDRC (China’s state economic planner) reaffirmed China’s resolution to abide by The UN Framework Convention on Climate Change and the Paris Agreement and promoted cooperation with the US, the EU and countries in the Global South on climate agenda. Considering the importance of the plan, the significance to China’s commitment to climate change is self-explanatory.”
LI SHUO – senior global policy advisor at Greenpeace East Asia – said: “I think the time of being too literal about these five-year plans and pretending that they offer us much insight that we did not know before is over. In some cases, China has realised that much in its macro economy and energy system cannot be planned. In others, huge political divergence exists. Therefore, it is not possible to land anything on paper (they did not have a coal capacity target in this plan because they are never going to agree on a number). All of these is to say the five-year plans have become an instrument of backloading consensus that is already there, not a forward-looking document that will fortune-tell the future. This, by default, makes the plans the ultimate killer of news. This is just another way of saying text analysis of these plans are useful, [although it] is probably two years behind China’s climate and energy trends.” 
YUAN JIAHAI – professor at the North China Electric Power University in Beijing – said: “Considering China’s basic system of planning its social and economic development on a five-year basis, this document is a master plan, laying out how the energy system will implement the ‘dual carbon’ goals in the next five years. General-secretary Xi Jinping has given important instructions regarding carbon peaking and carbon neutrality works at two recent meetings. The first task he stressed was to develop a clean, low-carbon, secure and highly efficient energy system. From a global perspective, energy transition is deepening and China needs to conform to this international trend. From the perspective of China’s development stage, energy plays a critical role in promoting social and economic development, which calls for a new energy system that can adapt to China’s new economic system.”
Other plans
ENERGY STORAGE: On Monday, China’s state economic planner and state energy regulator published a roadmap for the country’s energy storage sector for the 14FYP period. The document serves as a blueprint for the energy storage sector to develop “on a large scale” and in “industrialised and market-oriented” ways, according to an official interpretation. Yicai – a Shanghai-based financial outlet – analysed the document in a report. The outlet said that China’s power system would need more energy storage and other “flexible resources” to meet the needs of developing energy in “low-carbon” and “reliable” methods, citing China International Capital Corporation, a Beijing-based investment bank.
HYDROGEN: On Wednesday, China’s state economic planner released a plan to develop the hydrogen industry from 2021 to 2035, a third national plan on energy in three days. Wang Xiang – a spokesman from the state economic planner – said the document confirms that hydrogen “will be an important part” of China’s future energy system. State-run China Energy News listed some of the plan’s targets in a report. Among other objectives, China – the world’s current largest producer of hydrogen – aims to have “about” 50,000 fuel-cell vehicles on the road by 2025 and produce 100,000-200,000 tonnes of hydrogen using renewable sources annually by the same year, the report said. (Read Carbon Brief’s in-depth Q&A on hydrogen’s role in tackling climate change.)
Analysis
Why did China’s CO2 emissions increase in the past two years?
(This analysis is written by Timothy Goodson – world energy outlook analyst at the IEA – for Carbon Brief.)
Global CO2 emissions from energy combustion and industrial processes jumped 6% on 2020 levels in 2021 to reach 36.3bn tonnes (Gt), their highest-ever level and around 180m tonnes (Mt) above the pre-pandemic level of 2019.
In China, CO2 emissions grew to 11.9Gt, an increase of almost 5% on 2020 levels and 750Mt above 2019 levels, more than offsetting the aggregate decline in the rest of the world of 570Mt between 2019 and 2021.
The emissions trend in China from 2019 to 2021 was underpinned by continued economic growth. China was the only major economy that did not suffer from a drop in economic output in 2020: while global GDP declined 3.4% in 2020, GDP in China increased by 2.1% in 2020. The global economy then rebounded in 2021, with output rising by 5.9%, but in China, growth was even higher at 8.4% in 2021.
As a result of this rapid GDP growth and additional electrification of energy services, electricity demand in China grew by 10% in 2021. The increase in demand of almost 700 terawatt hours (TWh) was the largest ever experienced in China. In 2021, China also saw its largest ever increase in renewable power output (electricity generation from renewables in China neared 2,500TWh in 2021, accounting for 28% of total generation in the country). 
However, this increase in generation from renewables and other low emissions sources of supply met only 40% of demand growth. As a result, coal was called on to fill 56% of the rise in electricity demand. This increase in the use of coal for electricity generation made, by far, the biggest contribution to the emissions increase in China in 2021.
Overall, the recovery from Covid-19 related economic shocks in China appears to have been particularly energy-intensive. The primary energy demand intensity of China’s GDP between 2019 and 2021 improved by an average of 1% annually – compared with 1.2% between 2008 and 2010 when China enacted a huge economic stimulus and an average improvement rate of 3.7% from 2010 to 2019.
China now accounts for one-third of global CO2 emissions from energy combustion and industrial processes, and per-capita CO2 emissions in China now exceed the average of 8.2 tonnes of carbon dioxide (tCO2) per capita for advanced economies, although the overall average for advanced economies masks significant regional differences.
The global emissions increase in 2021 marks a dangerous record. To keep alive the possibility of reducing global CO2 emissions to net-zero by 2050, the world would need to ensure that the global rebound in emissions in 2021 was a one-off – and that sustainable investments combined with the accelerated deployment of clean energy technologies will reduce CO2 emissions in 2022.
(IEA’s report has more emissions statistics from China and worldwide in 2021. For more analyses on China’s CO2 emissions, read Carbon Brief’s guest posts by Lauri Myllyvirta.)
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