New economic policies to have ‘profound impacts’ on emissions
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”.
China needs ‘urgent additional action’ in energy transition
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.