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China will be carbon neutral by 2060: fantasy or reality?

I am a Bocconi-Fudan China MIM student (class of 2020). The topics I am most interested in are Chinese politics, society, and economy, European politics and economy, sustainable & smart mobility, renewables, space exploration. In my spare time, I am a wannabe painter.

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On 22 September, President Xi pledged to make China carbon neutral by 2060. Today, this seems an unrealistic goal, as the Chinese economy is addicted to coal and China is the world’s top CO2 emitter. However, China is also the world leader in clean technologies and a pioneer in several innovative sectors. Provided the political stability and political will in the coming decades, China could turn this ambitious goal into a reality.

The Pledge to Become Carbon Neutral

On September 22nd, at the UN Biodiversity Summit in New York, China’s President Xi Jinping pledged China to peak carbon emissions before 2030, to then turn carbon neutral by 2060. The pledge represents a milestone in the fight to climate change, since China is the second-largest economy in the world and accounts for about 28% of global CO2-emissions.

International commentors received with surprise Mr Xi’s announcement. Indeed, despite being one of the 2015 Paris Climate Agreement signatories, China long refused to set a clear long-term goal for cutting its CO2-emissions and justified the choice by claiming to be a developing country that could not uncouple its economic growth from CO2-emissions growth. But China is no longer a developing country, it now sees itself as a global superpower. And the climate agenda can be a great instrument to showcase China’s leadership in global politics.

The Challenge

In contrast to its own political arguments, China did successfully uncouple its economic growth from CO2-emissions growth. From the opening of its economy in 1978 to 2018, China’s GDP grew 15 times more than its emissions, and the country decreased its carbon intensity from 0.96 in 1978 to 0.57 CO2 kg/GDP unit in 2016.

However, China’s growth model and addiction to coal make it the world’s top CO2 emitter – with 10.06 billion tonnes of CO2 emissions in 2018. Investments in infrastructure have been pivotal to China’s unprecedented economic development, yet they do not represent a sustainable growth model. After an economic slowdown in 2012, the Chinese government has tried to pump up economic growth by investing in infrastructure. Such growth model makes it extremely hard for China to cut its CO2 emissions. Indeed, focusing economic stimuli on constructing infrastructure, the Chinese government propelled the growth of very polluting and energy-intensive industries such as coal, steel, cement, and chemicals, which accounted for 78% of the coal used in 2018.

China is addicted to carbon and, to date, does not seem willing to detoxify. In 2018, coal made up 67% of China’s power generation mix. In the same year, China consumed 3.8 billion tonnes of coal – amounting to 49.4% of the world’s total coal consumption. Moreover, coal is the most carbon-intensive fuel. Only in 2018, it globally generated 14.68 billion tonnes of CO2 emissions, about 7.25 billion tonnes of which were produced in China. Furthermore, China has 250 GW of new coal capacity either proposed or under construction, on top of its about 1,000 GW of existing coal capacity. In fact, starting in 2017, many local governments – in the attempt to boost GDP – have presented around 210 projects for coal power plants. Such projects go against the central government’s climate targets and are also an economic nonsense as the Chinese coal industry is already afflicted by overcapacity and underutilisation, with about 50% of coal plants are currently running at a loss.

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The Opportunity

Nevertheless, China is also the world’s frontrunner in clean technologies, and it can build upon its leading position in renewables and electric mobility to achieve carbon neutrality. Indeed, China is the biggest investor in renewables and leads the world’s solar industry with more than one-third of global capacity, with 175 GW of solar power in 2018. Similarly, the country is leading the deployment of wind power, with about one-third of global capacity – 185 GW of wind power in 2018. Most importantly, China’s mass production of turbines and panels made wind and solar energy competitive. Chinese producers’ scale economies led to a decrease in the cost of wind power and solar power by 69% and 88%, respectively, over the past decade. 

According to Roland Berger’s Electric Vehicle Index, China is the leading country for electromobility in terms of industry development and market size, and is second only to Germany in terms of technology. As of today, 47 per cent of the world’s electric vehicles run on Chinese streets. Moreover, in the last ten years, China has built a solid industrial competitive edge in battery manufacturing and hosts 73% of the world’s production capacity of lithium batteries – the most critical components in electric cars. Furthermore, China is also ahead in developing advanced grid and traffic management technologies, and in 2019 it has installed more civil nuclear power plants than any other country.

The Path Forward

In the pursuit of carbon neutrality, China must reduce its carbon emissions by about 90%, and offset the rest through natural systems or carbon-sequestration technologies. Early estimates from consultancy firm Wood Mackenzie indicate that China should invest more than 5 trillion US dollars – approximately 35.4% of China’s nominal GDP in 2019 – to reach carbon neutrality by 2060.

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The energy transition will be crucial to achieve net-zero carbon emissions. An analysis from Cambridge Econometrics (CE) indicates that, over the next 40 years, investment in the power sector alone should increase by $4tn in today’s prices. A report from the Rocky Mountain Institute (RMI) estimates that China’s current electricity generation will have to more than double to 15,000 terawatt-hours by 2050. Wood Mackenzie also argues that solar, wind and storage capacities in China should increase 11-fold to reach 5,040GW by 2050 compared to 2020 levels.

Hydrogen will be key in electrifying heavy industries like steel, cement, and chemicals. According to the consultancy firm, hydrogen production should increase by 5 times to reach about 150 million tonnes by 2050. The RMI report envisions a combination of recycling steel and using hydrogen or coal with carbon capture to produce new steel in 2050. Furthermore, Wood Mackenzie also claims that China should fully electrify its road transportation, increasing the number of electric vehicles from 4 million to 325 million by 2050.

The Chinese government will also have to tackle major societal problems such as the retraining and reallocation of the more than 5 million workers of the coal industry. However, social policies could be financed with the additional tax revenue resulting from the increase in GDP. Indeed, Cambridge Econometrics’ analysis also indicates that the massive investments would increase China’s GDP by up to 5% before 2030.

More Reality than Fantasy

In 2019, the Energy Transitions Commission established that “it is technically and economically possible for China to achieve net-zero emissions by 2050”. Furthermore, several contingencies could evolve and prompt the Chinese government to accelerate the transition towards net-zero carbon emissions economy by 2060. First, the increasing rivalry between China and the US could take the two countries to confront on the sustainability arena, analogously to space exploration for the US and the USSR during the cold war. Second, the drastic redesign of global supply chains led by the COVID-19 pandemic could positively impact China’s environmental performance. Indeed, many agree on the fact that China will no longer be the world’s factory and, even though some Chinese industries will certainly suffer, the discontinuation of some low-value productions could benefit China in its pursuit of carbon neutrality. Third, future price volatility of oil and gas could push the Chinese government to hasten the switch to renewable to minimize its dependence on imports and improve the country’s energy security.

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In conclusion, provided the Chinese Communist Party maintains its leadership for decades to come, China’s carbon neutrality by 2060 will be a reality. China certainly has a remarkable track record in achieving outstanding results, such as the lifting of hundreds of millions out of extreme poverty. President Xi’s pledge to carbon neutrality is credible, but it lacks a clear roadmap. However, next March, the Chinese Communist Party is expected to deliver it in its fourteenth five-year economic plan.

Author profile

I am a Bocconi-Fudan China MIM student (class of 2020). The topics I am most interested in are Chinese politics, society, and economy, European politics and economy, sustainable & smart mobility, renewables, space exploration. In my spare time, I am a wannabe painter.

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