In September 2020, Chinese President Xi Jinping announced to the United Nations General Assembly that China would expedite its voluntary carbon emissions reduction targets ahead of its pre-existing commitments.
China, Xi said, would hit peak emissions before 2030 and become carbon neutral before 2060. Previously, under the Paris climate agreement, China committed to reach peak emissions “around” 2030, and did not have a set date to become carbon neutral.
Carbon neutrality means that countries balance their CO2 emissions by equivalent reductions in CO2 from the atmosphere. China’s pledge to become carbon neutral puts it in closer alignment with many other countries, such as the US and EU member states, which have pledged to become carbon neutral by 2050.
As the world’s largest polluter of carbon dioxide – responsible for about 28 percent of global emissions – China’s pledge to become carbon neutral will change the nature of the country’s economy, as well as global efforts to combat climate change.
While there are significant information gaps about how China will achieve carbon neutrality, it will unavoidably require a rapid shift from fossil fuel energy to renewable energy sources. Though 2060 sounds far off, reaching such ambitious carbon reduction targets requires immediate action from the Chinese government, presenting new opportunities for foreign investors in the renewable energy industry.
Ongoing reliance on fossil fuel energy sources
Xi’s commitment to accelerate emissions reductions reflects the Chinese government’s increasingly urgent stance towards climate issues. However, while the target of peak emissions before 2030 is rapidly approaching, it is unclear when exactly it will be, and even what data the government is using to calculate emissions. Regardless, some Chinese researchers project that China will reach peak emissions as soon as 2025, although this is up for debate.
What is clear is that energy and power generation will be the single sector most directly impacted by China’s carbon neutrality pledge. In China, this sector is responsible for 52 percent of carbon emissions, higher than the global average of 41 percent.
This is partly due to China’s reliance on coal, which is a cheap and reliable but particularly polluting energy source. China has a larger installed coal capacity than every other country in the world combined. In 2020, fossil fuels made up 49.1 percent of China’s power capacity – the first time the figure was below 50 percent – but coal still contributed 61 percent of power actually generated.
China’s heavy use of fossil fuels means a transition to electricity and renewable energy sources is the most impactful area for carbon reduction, but this is easier said than done. China’s 14th Five Year Plan, which covers the years 2021 to 2025, caps annual coal output at 4.1 billion tons. But, in 2020, China’s coal output grew to 3.9 billion – meaning that the plan does not call for immediately reducing coal output, but limiting its growth potential.