Obtain the data you need to make the most informed decisions by accessing our extensive portfolio of information, analytics, and expertise. Sign in to the product or service center of your choice.
Climate emphasis in China’s 14th Five-Year-Plan unprecedented: analyst
16 April 2021Bernadette Lee
The strong emphasis on the climate in China's 14th
Five-Year-Plan (FYP) released in March is unprecedented,
underscored by the country having met most of its binding targets
and the new policy direction for the energy sector, according to an
IHS Markit analyst.
The FYP is a comprehensive plan
released by the Chinese government every five years to guide the
country's overall economic and social development.
Innovation, the livelihood of its people, safety and security,
as well as environmental protection with a specific focus on carbon
neutrality and peaking carbon emissions are the four key pillars of
the 14th FYP.
However, the importance of GDP growth was downplayed in the
plan, Yating Xu, IHS Markit senior economist said during the
Beijing Virtual Energy Briefing organized by IHS Markit on 14
April.
While a more detailed energy plan, one of the sectoral 14th
FYPs, is expected to be released in a few months' time, the 14th
FYP mapped out the overall energy and climate targets that will
guide the country in the five years beginning 2021, in addition to
setting longer-term targets for 2035.
The policy direction for the energy sector is already reflected
in the Chinese government's policies, even without seeing more
targets, said Lara Dong, research and analysis director, power at
IHS Markit, another speaker at the event.
"It is clear that climate commitment has become the central
policy theme in the 14th FYP. The energy-related goals in the FYP
so far anchored the updated Nationally Determined Contributions
(NDCs) [set in 2013] and carbon emissions peaking targets before
2030. This means that we don't expect China to set much more
ambitious policy targets than the 2030 climate goals even though
those goals are more modest than the 2060 carbon neutrality goals,"
she said.
The various targets met as of the end of 2020 demonstrate China
is on track in its energy transition pathway, Dong said. This is
evident in comparing 13th FYP targets with actual numbers achieved
in the primary energy mix. The target set for coal was 58% versus
56.8% achieved; for non-fossil fuels the target was 15%, compared
with 15.9% achieved; and for natural gas, 8.4% was achieved versus
8.3%, which was revised from an original target of 10%.
"Primary energy structure is an important indicator of China's
energy transition away from fossil fuels," she added.
Targets
Illuminating its climate commitment, the 14th FYP made clear
that China's energy-related goals will continue to leverage the
updated NDCs, the carbon emissions peaking target by 2030, and
carbon neutrality goal by 2060.
Energy intensity and carbon emission intensity reduction targets
have been set at 13.5% and 18%, respectively, compared with the
2020 levels.
Support for non-fossil fuel energy development is also evident
in the 14th FYP, with a goal of 70 GW of newly installed capacity
by 2025, which is a 40% increase from 2020, said Dong. "[This] is a
clear acceleration in development," she said.
The target for the primary use of non-fossil fuel energy has
been set at 20%, representing a midpoint between the 15% target for
2020 and the 25% target for 2030.
Although specific wind and solar PV targets are not available
yet, the latest plan set out a blueprint involving a variety of
onshore clean energy technologies plus investment in the
transmission grid and nuclear, as well as offshore wind in the
coastal region.
Drivers
Accelerated development of renewables and nuclear power in the
next five years will be one of the main drivers toward the 2060
net-zero target, supported by controls on energy consumption, Dong
said.
However, China also recognized natural gas as a clean fuel in
the 14th FYP. Ensuring a secure supply of natural gas will
therefore be a key focus as China prioritizes domestic production,
supply diversification, pipeline capacity expansion, and
connectivity, as well as peak supply options, she added.
The 14th FYP also acknowledges that energy efficiency gains,
electrification, and energy mix transformation will contribute to
long-term carbon emissions reduction, Dong said.
Controls
Targets and drivers aside, China has long implemented energy
consumption caps, beginning with the 12th FYP a decade ago. In the
14th FYP, the Chinese government said a carbon emissions cap will
be a supplementary policy tool to the intensity targets, but no
official carbon emissions cap has been set so far, according to
Dong.
"It is likely that the upcoming energy sector FYP will include
such a goal and indicate whether the control of carbon emission
will materialize," she added.
Consumption control will also be extended to coal, the most
abundant energy resource in China, but, even then, coal will
continue to play a significant role in securing energy for China as
part of the overall energy mix, according to Dong.
"That explains why the 14th FYP also stresses clean and
efficient use of coal instead of a total phase-out," she said.
The FYP also included some binding targets that constitute some
form of control, including reducing pollution in heavily polluted
areas and cleaning up highly polluted water.
"China's new environmental policy will put pollution control and
carbon emission reduction in parallel. This again demonstrates the
strengthened climate theme in the 14th FYP," Dong said.
A proposal for a market mechanism has also been included in the
14th FYP, urging the establishment of a carbon trading market. But
it remains to be seen whether energy market transactions will
automatically lead to a reduction in manufacturing costs, Dong
said.
These drivers alone will be insufficient in achieving carbon
neutrality by 2060. Different emissions removal technologies such as carbon
capture, utilization and storage (CCUS), low-carbon energy sources
such as hydrogen, reduction in non-energy emissions, as well as
trading options will play critical roles in China's bid to achieve
its net-zero emissions target in the long term, Dong said.
Regional variations
Dong also said the pace of policy implementation will vary
regionally. President Xi Jinping's September 2020 announcement on
carbon emissions peaking by 2030 and carbon neutrality by 2060 has
reached the municipal, regional, and provincial levels.
At the municipal level, the Ministry of Ecology and Environment
(MEE) published draft national Emissions Trading System (ETS) legislation, the "Interim
Regulations for the Management of Carbon Emissions Trading", on 30
March and included carbon emissions peaking action plans as some of
the key tasks for 2021.
The legislation, now undergoing public consultation, seeks to
link the national ETS more closely to the carbon emissions peaking
and carbon neutrality targets. The legislative process could
finalized by the end of 2021.
Other ministries including the Ministry of Industry and
Information Technology and Ministry of Finance, as well as the
central bank, have each issued policies that support carbon
emissions peaking and the climate change commitment.
At the regional level, eight provinces, mostly on the coast,
announced they would lead the decarbonization effort, with the aim
of achieving the carbon emissions peak ahead of the deadline for
the nation. Another 20 provinces have indicated a commitment to
formulate and implement action plans for the carbon emissions peak
throughout the 14th FYP period.
Industries' efforts
Energy-intensive sectors such as those in steelmaking and
non-ferrous metals melting have begun drafting plans to achieve a
carbon emissions peak by 2025 or earlier.
At the company level, State Power Investment Corporation and
state-owned energy company Sinopec have pledged to achieve peak
carbon emissions by 2023.
"Based on these signposts, as of today, and the expected
development pathway in the next five to 10 years, we believe China
will be able to meet the 2013 NDCs and carbon emissions peak before
2030," Dong said.