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China needs to recalibrate policy, develop technology to meet 2060 net-zero goal: IHS Markit
17 February 2021Bernadette Lee
China must recalibrate its energy transition policies to
accelerate decarbonization work and develop new technologies if it
is to meet its net-zero carbon goal in 2060, according to an IHS
Markit analyst.
China's zero-carbon plan for 2060 is an extremely challenging
long-term target that will require the country to find new policy
solutions and deploy the right technology in the next five to 10
years, said Lara Dong, research and analysis senior director,
power, at IHS Markit in Beijing.
"Before 2030, the key focus of the policies was to align the
efforts from all aspects and to gain momentum for decarbonization.
[…] if you think about China's previous carbon commitment, the
country is set on a decarbonization trajectory, but that trajectory
wouldn't take China to achieve its 2060 goal. The most important
point is not about whether what's happening now will lead to 2060
zero carbon emissions. It's about recognizing policy change,
starting with the top leadership, and whether a change in
trajectory will eventually lead to zero carbon in four decades or
more," she said.
"The technical perspective also seems optimistic. The listed
technical solutions are largely existing technologies, whose
capability in resolving future challenges with variable [levels of]
renewable power penetration remains questionable," Dong said.
Lauri Myllyvirta, lead analyst at the Centre for Research on
Energy and Clean Air (CREA), a global research organization
headquartered in Finland, told IHS Markit deployment of technology
on a massive scale - rather than technical advances - is what is
needed to reduce the majority of China's emissions.
"Likely the main policy challenge is managing the effects of the
transition on regional economies that are currently heavily
dependent on fossil fuels. This will require policy and political
innovation if not technical innovation," he said.
14th five-year plan
China is expected to release its 14th five-year plan at a
legislative session in March 2021, which will outline specific
targets for coal and renewables in the energy sector. The five-year
plan is high-level guidance about how the Chinese government will
guide the economy.
"At each level - national, provincial and enterprise - they have
to plan how to achieve the carbon peak before 2030. The zero-carbon
pledge is a commitment made by top leadership. The most effective
way for China to make things happen is [through] the top-down
approach. Once the leadership makes that happen, it will cascade to
all government agencies and state-owned companies," Dong said.
Myllyvirta said he expects to see the most important targets in
the energy five-year plan, usually released around March, but it is
likely to be delayed to allow updates required by the climate
pledges.
Along with the overarching five-year plan and the energy
five-year plan, the national carbon dioxide peaking action plan and
the 2035 infrastructure plan, which are in the process of being
prepared by China's Ministry of Ecology and Environment (MEE) and
the State Council of the People's Republic of China, respectively,
will be the most relevant documents for the country's
implementation of its 2060 pledge, he added.
China is also in the process of drafting a new energy law and
updating its electricity law, but administrative measures, rather
than broad legal or market frameworks, will remain central to
China's policymaking, Myllyvirta said.
"An inspection group that comes directly under the Communist
Party Central Committee carried out an unprecedented inspection of
the National Energy Administration (NEA) which called the agency
out for failing to prioritize the low-carbon transition in these
processes, so we can expect further emphasis and revisions [to the
laws]," he said.
The inspections have targeted local governments and firms in the
past. This is the first time that a central government agency was
targeted.
Updated 2030 targets
China made its first climate commitment in 2009, with a number
of targets for 2020. In 2010, it revised its targets and committed
to reaching peak carbon emissions by 2030. On 20 September 2020,
President Xi Jinping announced China's new target of becoming
carbon neutral by 2060 to the UN General Assembly.
On 12 December 2020, Xi announced updated 2030 carbon targets at
the Climate Ambition Summit, representing a part of China's new
Intended Nationally Determined Commitment (INDC). These include
reducing carbon emissions per unit of GDP by over 65% compared with
the 2005 level; increasing the role of sources of energy that are
not fossil fuels in primary energy consumption to around 25%;
increasing the forest stock volume by 6 billion cubic meters from
the 2005 level; and increasing wind and solar power generation
capacity to at least 1,200 GW.
"For China, most of the updated 2030 targets represent an
incremental tightening from those stated five years ago in Paris,
especially compared with Xi's 2060 carbon neutrality pledge made in
September [2020]," according to an IHS Markit report, titled
"China's new 2030 commitments: Beyond peak emissions," published on
15 December 2020.
What is also striking about China's updated 2030 targets is the
inclusion of specific installed capacity targets for renewable
power, IHS' Dong and Bing Han, senior research analyst, said. But
they also noted that the targets for wind and solar are not
exceptionally "aggressive." China is expected to add more than 70
GW of wind and solar capacity each year in the next decade on a
path to generation capacity of more than 1,200 GW by 2030,
according to the latest IHS Markit outlook.
"The increasing penetration of renewables will be accompanied by
a reduction of coal-fired power capacity, as well as the growth of
hydro, nuclear, and battery storage to maintain the capacity
adequacy and reliability of power supply," the IHS Markit report
said.
Heading in emissions-intensive direction
It has become increasingly clear in the past months that the
trends in mainland China have been heading in a very
emissions-intensive direction, with major investments mobilized
into fossil fuel infrastructure, said Myllyvirta. This would seem
to undermine the credibility of the long-term emissions pledges.
But he also pointed out some recent positive developments,
including the unprecedented inspection of the NEA with heavy
criticism on its failure to rein in coal power, as an indication
that the leadership is serious about changing direction.
China's short- to medium-term policies are likely to focus on
the areas and industrial sectors that are designated as peaking
early, said Myllyvirta. This will include provincial capitals and,
possibly, "key economic regions" that generate large shares of
China's industrial output.
National Emissions Trading Scheme
On 5 January, China's Ministry of Ecology and Environment
published the first national carbon trading regulation and
announced the commencement of the first compliance cycle of the
China National Emissions Trading Scheme (ETS), which covers the
power generation sector only.
"The initial impact by national carbon market will be limited,
because of the ample free carbon emission allowance. But with the
establishment of the market infrastructure and functional market
mechanism, we expect gradual tightening of emission allowance,
expansion of industry coverage and stricter market rules. In the
future, the national ETS will become a key policy tool that the
policymakers can leverage on to achieve the nation's climate
commitments," Dong said.