China to balance climate ambitions, economic growth with latest five-year plan: analyst

Chinese Premier Li Keqiang's State of Nation address 5 March demonstrated policymakers' intention to balance the country's climate ambitions and the need for economic growth amidst the virus pandemic, according to an IHS Markit analyst.

The State of Nation address, formally known as the Government Work Report, released policy targets for 2021 and policy directions for the 14th Five-Year Plan (FYP) from 2021 to 2025.

"The Premier's Work Report largely reaffirmed China's current policy directions, but with an added emphasis on climate change. As is the case in recent FYPs, both economic growth and green commitments will be key considerations for national plans," said Lara Dong, research and analysis senior director, power at IHS Markit in Beijing.

Accelerating economic, energy transformation

The Work Report also called for specific plans, widely expected to be released over the next few months, to be put in place for achieving peak carbon emissions before 2030. Dong said China must accelerate its economic and energy transformation to achieve that goal and then the much more challenging carbon neutrality target for 2060.

"The plans are expected to become immediate tasks for all levels of government agencies and state-owned enterprises and they will have implications for industry- and company-specific FYPs," she said.

China's net-zero ambition a challenging task

In his address to the United Nations in September 2020, President Xi Jinping announced China's commitment to carbon neutrality by 2060 and its plan to hit the peak carbon emissions target before 2030.

But China's zero carbon plan for 2060 will require new policy solutions and deployment of the right technology in the next five to 10 years, Dong said.

China's energy consumption per unit of GDP and carbon emissions per unit of GDP are expected to fall by 13.5% and 18%, respectively, according to the Work Report.

"These targets are generally aligned with those in the 13th FYP, which were 15% and 18% reductions, respectively. This reflected the government's continued focus on delivering economic restructuring, energy efficiency, and clean energy results," Dong said. She expects those two targets to remain "binding," as was the case in the last FYP.

Clean and efficient use of coal

The Work Report also included plans for clean and efficient use of coal over the next five years, starting from 2021 — an indication that the government expects to see an increase in coal consumption in the next five years, Dong said.

"[This is] a potentially controversial point given that coal accounts for nearly 80% of total energy-related carbon emissions in China," she said.

At the same time, Dong said the report made it clear that China plans to invest in clean energy, particularly nuclear power.

"These indicate the Chinese government's ambitions in becoming a technology leader in low-carbon energy in the long term," Dong said.

Original reporting by Soo Cheng Bernadette Lee.