China Briefing: New economics measures; Assessing China’s climate pledges; Coal plant research

A dozen government agencies jointly issued a new notice last Friday, laying out 18 directives for the country’s industrial economy for 2022. At least half of the measures are “directly related” to China’s climate goals, one expert told Carbon Brief. He added that these measures would have “profound impacts” on the country’s carbon dioxide (CO2) emissions.

Meanwhile, a new Carbon Brief guest post said that China has made “great strides” in implementing its climate obligations domestically. However, in order to meet its climate goals, the country will need to take “urgent additional action” to drive a clean energy transition at home and abroad, the article added.

Elsewhere, new research has shown that China started building 33 gigawatts (GW) of new coal-fired power plants last year – “the most” since 2016. Furthermore, China’s state economic planner announced on Monday that three “billion-dollar” coal mine projects had been approved. The authority also said that the nation’s coal production had bounced back from a holiday lull.

WHAT: China’s central government issued new instructions last Friday to guide the growth of the country’s industrial economy – which concerns the production of tangible finished goods and infrastructure. The document aims to “further enhance the growing momentum of the industrial economy”. It consists of a wide range of economic policies, from financial incentives to medium and small companies to dedicated campaigns for solar and wind power. The instructions came from 12 top-level government agencies, including the Ministry of Finance, the Ministry of Industry and Information Technology and the National Development and Reform Commission (NDRC), the state economic planner. 

INSTRUCTIONS: The document contains 18 detailed measures and “at least half” of them are “directly related” to China’s climate goals, according to China-based Dr Zhang Junjie. Dr Zhang – who is director of the Initiative for Sustainable Investment at Duke Kunshan University – listed some relevant measures for Carbon Brief. They included offering subsidies for the purchase of new energy vehicles and the installation of charging stations, promoting financial instruments to support “clean coal” utilisation and carbon emission reductions, and developing a tiered pricing system for electricity based on energy efficiency. Dr Zhang also highlighted the orders to incentivise solar and wind power innovation, retrofit low-efficiency coal-fired power plants, and step up energy conservation and emissions reduction in energy-intensive industries. 

‘PROFOUND IMPACTS’: Dr Zhang said these measures would have “profound impacts” on China’s emissions. He explained: “On the one hand, China provides incentives to the sectors related to the manufacturing, installation and consumption of low-carbon products. These policies will not only reduce China’s own emissions but also strengthen the competitiveness of these industries in the world.” On the other hand, however, China “continues to support the upgrading of the fossil fuel sector for the sake of energy security”, Dr Zhang said, adding that the move would likely create “an unintended consequence” because the state’s financial support “is likely to delay the phasing-down of fossil fuels”. He also noted that the financial and innovation policies for fossil fuels would “also make renewables less competitive”. 

RENEWABLES: Andy Chen – an analyst on renewables at Trivium China, a policy research firm with headquarters in Beijing – told Carbon Brief that, in his opinion, the most impactful measures in the guidance were: re-lending tools aimed at upgrading and greening the coal-fired power industry; improving tiered electricity pricing, especially for energy-intensive industries; increasing solar and wind power generation capacity in western provinces, as well as offshore wind power projects along the eastern coast; excluding newly-added renewable-sourced energy from energy consumption quotas.

SIGNIFICANCE: Chen said not subjecting the consumption of renewable-sourced energy from newly-added renewable energy power generation projects to the overall energy consumption evaluation and quota system would “incentivise” power users – especially those in energy-intensive industries – to consume more “green” electricity instead of thermal power. The move would, in turn, boost renewable development, he said. “This will also likely lead to more heavy energy users to build up their own distributed solar power projects to supply their manufacturing plants, so distributed solar capacity will likely grow faster than centralised solar in the years ahead,” Chen added.

ANALYSIS: International Energy Net (IEN) – a Chinese website focused on the global energy industry – said in an analysis that the policies would impact three industry groups: solar and wind power; “energy-intensive” industries; and coal. The website said that, for example, the guidance would potentially solve the problem of a lack of land for solar and wind projects by ordering authorities to build “large-scale” solar and wind power plants in deserts. The outlet noted that the guidance added further restrictions on “energy-intensive” industries by ordering the establishment of a tiered electricity pricing system. The move, according to IEN, could better balance China’s power demand and power supply while “forcing backward production capacity to be phased out”. 

BIG PICTURE: Cory Combs – an analyst on energy at Trivium China – told Carbon Brief that China is facing two “distinct challenges”. One is “decarbonising existing production and service provision” and the other is “minimising emissions from new demand over the coming decade”, he said, adding that the “key” to both challenges is “to decarbonise the energy mix”.

WHAT: A new Carbon Brief guest post has examined the world’s expectation of China on climate change policies and energy transition – and if China has lived up to its pledges – since the country announced its “carbon neutrality” goal in September 2020. The article’s author – Dr Xie Chunping from the Grantham Research Institute on Climate Change and the Environment – explored these questions in the piece, based on a recent study she had carried out with her colleagues. The article noted that China has made “great strides” in fulfilling its climate commitments on a domestic level. However, it will not meet its climate goals unless it takes “urgent additional action” to drive a clean energy transition, both domestically and internationally, the piece added.

ABSOLUTE CAP: According to Dr Xie’s post, China has set the direction for its energy policy with a set of top-level instructions known as the “1+N” policy framework. It has also set short-term goals on two benchmarks pegged to its economic growth: energy intensity (energy consumption per unit of GDP) and carbon intensity (CO2 emissions per unit of GDP). However, the country has yet to announce an absolute cap on CO2 emissions – a “key gap” in the country’s climate targets, according to Dr Xie.

DUAL CONTROL: China has built its energy policy around the so-called “dual-control” measures to curb its total energy consumption and energy intensity. However, Dr Xie noted that capping fossil fuel energy consumption, instead, could “directly promote the development of renewables and reduce the risk of stranded fossil fuel assets in the future”. She also highlighted the “global significance” of the measures China had taken to address the power shortages late last year.

RENEWABLES: Although China is now “leading the world” in renewable development, for it to meet its non-fossil energy target, it must continue to “rapidly” increase renewable generation capacity while “significantly” improving the integration of renewables into its power grid, according to the article. It added that there is an “increasing need” for flexibility in the country’s power system to balance electricity demand and supply in real time due to the variability of wind and solar power.

ETS: China’s national emissions trading scheme (ETS) – which was launched in mid-July last year – “has the potential to drive energy sector transition”, Dr Xie wrote. She noted that, although carbon prices in China are “very low” right now, the national ETS could play “an important role” in China’s low-carbon transition if more “ambitious” carbon pricing policies are introduced. (Read Carbon Brief’s analysis on how the national ETS could help China tackle climate change.) 

GLOBAL ROLE: The guest post also pointed to the “increasing interest” in China’s role in international collaboration and coordination in climate action – one of the findings in the paper written by Dr Xie and her colleagues. According to the study, China could “play a key role” in global energy transition on three fronts: as the world’s current largest CO2 emitter, as “the front-runner” in clean-energy technologies and as an “increasingly important” lender to developing countries.

COAL RESEARCH: China started constructing 33GW of new coal-fired power plants in 2021, according to new research. The figure is the highest since 2016 and almost three times as much as the rest of the world, combined, the research found. It also said that China’s coal power capacity “continued to increase” after taking into account plant retirements, which had also slowed down. The research was published by the Centre for Research on Energy and Clean Air (CREA) and Global Energy Monitor.

COAL PRODUCTION: China’s coal production has exceeded 12m tonnes a day after rebounding from the Lunar New Year break, the state economic planner said on Monday. On 20 February, the nation mined nearly 12.2m tonnes of coal – an amount similar to the daily production of the fourth quarter of last year – the authority noted. It added that, province-wise, Inner Mongolia had produced more than 3.7m tonnes of coal a day “in the recent few days”, setting a monthly record, while Shanxi and Shaanxi had reported daily production of 3.5m tonnes and 2m tonnes, respectively.

NEW MINES: The state economic planner also announced on Monday that it had approved three “billion-dollar” coal mine projects, according to Bloomberg. The three projects – two in Shaanxi and one in Inner Mongolia – “will require a total investment of 24.1bn yuan ($3.8bn) and produce 19m tonnes of coal a year”, the outlet said. It added that the decision came “as [China] continues to support the fuel that much of the rest of the world is shunning”. (Carbon Brief found the three official approvals on the state economic planner’s website on Monday. However, the documents are no longer accessible for unspecified reasons.)

COAL PLAN: China Energy News (CEN) – an affiliation with People’s Daily, the official newspaper of the Communist Party of China – examined how 22 “coal-producing” regions in China plan to develop their coal industries in 2022 in an article published on Sunday. According to the publication, Shanxi province intends to construct 20 more so-called “smart” coal mines while Inner Mongolia pledges to build more than 100 new “green” mines. Shaanxi province plans to continue the construction of existing coal projects, including two that are expected to produce 10m tonnes of coal annually each. These three provinces – the largest coal-producing regions in China – all promise to ensure coal supply and energy security.

POLICY: Commenting on the CEN article, Byford Tsang – senior policy advisor at E3G, a climate change thinktank – told Carbon Brief that nothing in those provincial plans deviated from China’s energy policy directives, which “have stressed the security of energy supply and the need to ramp up ‘clean and efficient’ use of coal”. Tsang said that the “power crunch” in China late last year “has led policymakers to focus their minds on domestic energy security and stress the ‘centrality of coal in China’s energy resource endowment’”. He added: “Premier Li has stressed that ‘increasing the supply of coal’ is a government priority, as a means to stable prices and safeguard energy security.” 

FOOD: Chinese scientists have developed salt-tolerant strains of rice in an attempt to ensure food security – a country’s ability to feed its own population without reliance on imports – as “sea levels rise from climate change”, Bloomberg reported. Test fields in Tianjin – a municipality on China’s eastern coast – recorded a yield of 4.6 tonnes of the so-called “seawater rice” per acre last year, the outlet said. (Yuan Longping – a late Chinese plant scientist known as “the father of hybrid rice” – estimated in 2018 that the strains could help feed 80m more people if they could be successfully planted on 6.7m hectares of barren land.)

SOLAR: The installed capacity of China’s solar photovoltaic (PV) plants is expected to increase by 75 to 90GW in 2022, Reuters reported, citing the China Photovoltaic Industry Association. The projected figure dwarfs China’s record-high growth in solar power last year, which saw 55GW of capacity being added, the outlet said. (On a global scale, the range is similar to the roughly 80GW of solar capacity installed by the rest of the world combined in 2020.) Looking ahead, China could add an average of 83 to 99GW of new solar PV capacity each year between 2022 and 2025, the association estimated. China remains the global leader in solar PV power. Its cumulative installed capacity had surpassed 300GW by the end of last year – nearly three times that of the US, which is in second place.  

‘NO 1’ DOCUMENT: China’s central authorities have mentioned the “prominent challenge” for agriculture brought by climate change, in a top-level document issued on Tuesday. For the first time, the document has called on the nation to “strengthen” the study on how medium-to-long-term climate change would impact agriculture, Beijing News reported. It has also paid “unprecedented” attention to enhancing the nation’s capabilities of “effectively preventing and responding to major agricultural disasters”, the outlet said. (Traditionally, China’s central authorities have always dedicated their first policy statement of the year to agricultural affairs. Therefore, the latest document is known as the “No 1 central document”. It has given wide-ranging orders to promote “rural vitalisation".)