Will China fulfil its key climate pledge? | News | Eco-Business

After exceptionally slow progress in 2020-23, China is badly off track meeting its 2030 commitment on reducing the carbon intensity of its economy. Getting back on course is possible, but will require much stronger targets than the government has been willing to set over the past two years.

The carbon-intensity target China sets for the next five-year plan period (2026-2030) will be a key test of its commitment to the pledges it has made under the Paris Agreement.

Since the 2009 UN climate conference in Copenhagen, carbon intensity has been the centrepiece of China’s climate commitments. The country’s current commitment under Paris is to reduce CO2 emissions per unit of GDP by more than 65 per cent by 2030, taking 2005 levels as the baseline.

China’s carbon-intensity targets have been assessed as “insufficient” by Climate Action Tracker. This means that, to align with the goals of the Paris Agreement, they need to be substantially exceeded. If China misses the 2030 target, its emissions would peak at a higher level. This growth would make it much harder for global emissions to peak during this decade, putting the world much further off the path to meeting global climate targets.

After the election of Donald Trump in the US, China’s leadership emphasised its determination to respond to the climate threat. Fulfilling its existing commitments will be the fundamental test of that determination.

How China’s CO2 target fell off track

Until the Covid-19 pandemic, China was ahead of schedule in reducing carbon intensity. It had fallen by 48.4 per cent from 2005 to 2020, according to China’s report to the UN climate change secretariat in 2023. This comfortably exceeded the pledged target of 40-45 per cent for 2020 and the pace required to meet the 2030 target.

At that point, it seemed that China would almost effortlessly deliver its future carbon-intensity targets, and that the key step would be a shift to absolute emission targets. However, the commitment has taken on unexpected significance in recent years.

Improvements slowed sharply in 2020, when a drop of only 0.8 per cent was recorded, according to the annual Statistical Communique on Economic and Social Development. Nonetheless, the Paris Agreement and five-year plan targets were still met due to earlier overachievement. Then, in the years 2021-24, carbon intensity fell by 3.8 per cent, 0.8 per cent, 0 per cent and 3.4 per cent, averaging just 2 per cent per year.

This amounts to a total reduction of 7.9 per cent from 2020 to 2024 – a far cry from China’s target of 18 per cent by 2025.

The slowed progress was driven not only by slower economic growth but, more importantly, by faster CO2 emissions growth. GDP grew at an average of 4.7 per cent from 2020 to 2024, compared with 6.7 per cent in the preceding five years. But during the same period, CO2 emissions grew at an average of 2.4 per cent per year, from being stable in 2015-19.

The key reason was faster energy-demand growth relative to GDP growth: energy-consumption growth accelerated despite the economic slowdown. The Covid-19-era policy shift, with the government’s stimulus favouring manufacturing, including the most energy-intensive sectors, disrupted the trend of the Chinese economy becoming less energy-intensive.

Other major economies did the opposite, boosting household spending power, which fuelled demand for manufactured imports from China. While manufacturing surged, the much less energy-intensive service sector stagnated. The key driver of the earlier reductions in energy intensity – the shift to services – stalled.

When the Covid-19-era economic policies led to accelerated energy-consumption growth, rather than increasing efforts to cut energy intensity, the government dismantled the policies on energy-consumption control that had been a strong incentive for local governments to limit the expansion of energy-intensive industries.

The lack of progress on reducing energy intensity is not only a concern for climate and air pollution emissions. Controlling energy intensity is also an important part of realising and measuring “high-quality growth”, the central aim of China’s economic policy.

Where will China be after 2025?

With one year to go in the current five-year plan period, the gap between the 2025 carbon-intensity target and reality is almost certainly too large to bridge. However, what happens in 2025 will affect how much work is left to do in the next five-year period, until 2030.

As mentioned, China’s headline international commitment under the Paris Agreement is the 2030 goal of reducing carbon intensity by more than 65 per cent from 2005 levels, announced in 2020.

A carbon-intensity target for 2025 has not yet been announced. The government work report released in March, which sets annual goals and directions, only included a target to reduce fossil-energy use per unit of GDP by 3 per cent, excluding use for raw materials.

This provides an indication of the likely targeted improvement in carbon intensity. In 2024, carbon intensity fell by 3.4 per cent while fossil-energy intensity fell by 3.8 per cent. If a similar ratio holds in 2025, carbon intensity would fall by around 2.5 per cent at a minimum, allowing CO2 emissions to increase by more than 2 per cent. This would result in a carbon-intensity reduction of around 10.4 per cent during the 14th five-year plan period (2020-2025), and a reduction of about 54 per cent from 2005 to 2025.

If this scenario plays out, China would need a carbon-intensity reduction of 24.5 per cent during the next five-year plan period (2025-2030) to meet the 2030 target.

However, there is a good chance that CO2 emissions will fall in 2025, given the expected record clean energy additions and the recent slowdown in energy demand growth. If CO2 emissions fall by 1 per cent in 2025 in absolute terms, and if GDP growth continues at 5 per cent, the same rate as 2024, this would result in a carbon-intensity reduction of 5.7 per cent in 2025, leaving a 22 per cent reduction to be realised in the next five-year period.

Implications for the next five-year plan

To achieve its 2030 commitment, China needs to reduce carbon intensity by an average of 5 per cent per year from 2024 to 2030. While that might seem ambitious, it is not without precedent. From 2005 to 2019, China managed a 4.6 per cent annual average improvement. From 2015 to 2019, the rate was 6 per cent per year. The major acceleration of clean-energy growth since then makes carbon-intensity improvements significantly easier to deliver.

What does this mean for China’s absolute CO2 emissions? If GDP grows 5 per cent annually between 2024 and 2030, meeting the 2030 carbon-intensity goal would require a 2 per cent absolute reduction in energy-sector CO2 emissions from 2024 to 2030. If GDP growth is slower, a larger reduction would be needed.

While many experts believe China’s emissions have already peaked or are about to, the government has not committed to this. Officials still emphasise the potential for further emission increases. Targets for 2024 and 2025 currently allow space for emissions to grow.

The government’s focus, as demonstrated by this year’s work plan, is on realising the “dual carbon” goals: peaking CO2 emissions before 2030 and achieving carbon neutrality before 2060. These allow emissions to continue increasing until 2028 or 2029, meaning absolute emissions in 2030 could be significantly higher than in 2024. Even if the dual carbon goals are met, the 2030 carbon-intensity target – China’s key international climate commitment – is not guaranteed.

The government is currently building a “dual control” system covering absolute carbon emissions and emissions intensity, which will involve introducing an absolute emissions target for 2030 in the next five-year plan period. The risk is that the carbon-intensity commitment gets sidelined.

An absolute target is preferable in a qualitative sense because it limits the level of emissions regardless of the pace of GDP growth. This is why it has been a long-held aim of climate advocates and policymakers. However, setting an absolute emission target that allows for higher emission levels than the carbon-intensity target, under plausible rates of GDP growth, would be a step back. It is essential to make sure that any absolute emission target set for 2030 is aligned with the carbon-intensity commitment.

Getting back on track

To meet the 2030 carbon-intensity commitment, two things are essential: the clean-energy boom needs to keep going for the next five years, and the growth rate of energy consumption needs to cool to pre-Covid-19 rates.

In recent years, solar and wind power installations have run ahead of central government targets. To sustain this boom, either the overachievement needs to continue, or official targets need to increase.

China’s new electricity pricing policy for renewable energy removes price guarantees and will likely lead to lower prices paid to new projects. On balance, it offers more favourable pricing for the amount of new capacity needed to meet central government energy targets, similar to the Contracts for Difference scheme used in the UK. This emphasises the importance of the next five-year plan and China’s new climate pledge under the Paris Agreement, both of which are being finalised this year.

Supporting the large amount of new solar and wind installations also requires addressing bottlenecks in the power grid, particularly by making the operation of power plants and transmission lines more flexible. This will require reforms that have long been opposed by coal power plant and grid operators.