Four Numbers to Gauge China’s Climate Ambitions
A statue of former Chinese leader Mao Zedong in front of smoke stacks in Fuxin, Liaoning province, China. (Photographer: Qilai Shen/Bloomberg)

Four Numbers to Gauge China’s Climate Ambitions

BloombergOpinion

China will begin its biggest political meeting of the year with a grim mark on its record. Despite President Xi Jinping’s pledge in September to reduce carbon emissions to net zero in 2060, the country was the only major economy last year where pollution increased, according to International Energy Agency figures released Tuesday.

Four Numbers to Gauge China’s Climate Ambitions

That makes the details of the country’s climate policy in its 14th Five Year Plan published Friday crucial. If it lives up to Xi’s promise to cap emissions in the coming decade and push them down rapidly thereafter, the world will have started turning the corner on two centuries of carbon emissions, as we’ve argued. If it falls short, our prospects of avoiding the ravages of climate change will dwindle drastically.

The texts of Five Year Plans tend to be a mixture of Communist Party jargon, airy pabulum, and a few solid material targets. It’s the latter that will determine whether this year’s is worth more than the paper it’s written on. With the European Union pledging to reduce emissions 55% by 2030, here are our estimates of the numbers China needs to match that ambition.

Renewable generation capacity: 1,100 gigawatts by 2025.

We already have a good idea of where this figure is headed. Xi told a climate summit in December that there will be “over” 1,200GW of wind and solar connected to the grid by 2030, up from 530GW at the end of 2020. Much now depends on what “over” means. At 2020’s breakneck pace of renewable construction — around 120GW, a figure China’s wind and solar industries claim to be capable of more or less matching every year — you could hit Xi’s target four years early, causing coal-fired power to go into decline well before 2025.

Four Numbers to Gauge China’s Climate Ambitions

The risk is that 1,200GW is taken instead as a finish line, or even a soft upper limit. State Grid Corp. this week said it would connect more than 1,000GW of wind and solar by 2030. That’s less than the current national share of renewables on its network, and well behind its 88% coverage of China’s land area. Regardless of how many wind turbines and photovoltaic modules factories turn out, the real limiting factor is how many power lines the company builds — and given the long construction times involved, work on that needs to start immediately. 

If the country announced a target in line with industry capacity estimates it could install 1,100GW by 2025. The avoided carbon over the coming decade, relative to Xi’s baseline, would be equivalent to the annual emissions of the entire EU. 

New-energy vehicle market share: 25% by 2025.

As with renewable power, we already have a decent sense of where China is heading in terms of battery, plug-in hybrid and fuel cell vehicles — grouped together locally as “new-energy vehicles,” or NEVs. The governing State Council announced plans in November to lift their share vehicles to 20% of new car sales by 2025. That’s not quite as ambitious as it may sound: Already, the 1.3 million NEVs sold last year represented about 5.6% of the market.

Even so, it will require sustained efforts. Unlike countries in Europe and North America, which should see electric vehicles hit price parity with conventional ones before 2025, the tipping point in China is likely to be well into the second half of the decade. That means policy — such as purchase mandates for government and state-owned enterprise fleets, plus tax measures and preferred access to anti-congestion license-plate lotteries — will be needed to make up the difference.

Four Numbers to Gauge China’s Climate Ambitions

Still, electrification of road transport offers non-climate benefits for Beijing, too. The country depends on imports for about three-quarters of its oil, a serious national security vulnerability. Crude accounted for about 10% of China’s import bill last year. A target of 25% by 2025 — less ambitious than much of Europe, which expects to phase out conventional cars altogether by 2030 — would be a worthwhile goal.

Steel industry emissions: 25% reduction by 2025.

The growth in China’s steel output has been so headlong that a one-quarter reduction in emissions could be achieved just by switching off some of the exceptional stimulus switched on in recent years. Cutting steel production to the 832 million metric tons produced in 2017 alone would amount to a 21% reduction on 2020’s output levels.

That would be in line with the 150 million ton cut in steel capacity mandated in the last Five Year Plan, and China is rapidly approaching the point where, with about 10 tons of steel in use per person, the metal market approaches saturation. Given the importance of industrial output in hitting the government’s economic growth targets, such a reduction may still prove a struggle — but it’s not the only way to reduce emissions.

Four Numbers to Gauge China’s Climate Ambitions

Recycling scrap in an electric-arc furnace, rather than smelting virgin iron ore in a blast furnace, is the dominant method of steel production in the U.S., and cuts out as much as 80% of emissions. China already has plans to lift the share of such recycled steel to 20% from 10% over the next five years. Separate proposals to increase domestic scrap supplies to 300 million tons a year could lift that further.

A modestly smaller steel industry with a greater share of recycling could aim at cutting total emissions by 25% from 2020’s levels.

Cement industry emissions: 20% reduction by 2025.

If China’s cement industry were a country, it would have the third-highest emissions after China and the U.S. — equivalent to those from Japan, Germany, the U.K. and France, put together. That’s a problem. However, there’s ample evidence that China can rein in production when it wants to. Between 2014 and 2018, cement output fell by 12%, before bouncing back in 2019 and 2020 close to its peak levels.

Cement is one of the hardest industries to decarbonize. Unlike electricity, road vehicles and steel, there’s no technology close to commercialization that could produce a comparable product while substantially reducing emissions. On the other hand, it has one huge advantage, especially in a country like China: The vast majority of material is purchased by the state for major engineering projects, and its cost makes up a tiny percentage of construction expenses. If Beijing wanted to incubate a greener building sector, government purchase mandates — like the renewable portfolio standards that caused wind and solar power to take off in the U.S. during the 2000s — could go a long way to achieving it.

Given the absence of an obvious technological pathway, a simple emissions-reduction target seems most sensible. That could encourage cement plants to invest in biomass and waste as kiln fuel, in alternative materials for clinker, or in carbon-capture technology. Alternatively, it could cause construction companies to switch to different building products, such as engineered wood. Either way, there’s no point in pretending the government is powerless to direct an industry that lives and dies on government money.

Four Numbers to Gauge China’s Climate Ambitions

That’s a lesson for the 14th Five Year Plan as a whole. In China’s state-directed economy, 2025’s pollution won’t be some inescapable outgrowth of market forces at work. The proposals laid out Friday aren’t a projection, but a policy. If their ambition falls short of what’s needed to achieve Xi’s net-zero pledge, the world will know whom to blame.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

David Fickling is a Bloomberg Opinion columnist covering commodities, as well as industrial and consumer companies. He has been a reporter for Bloomberg News, Dow Jones, the Wall Street Journal, the Financial Times and the Guardian.

©2021 Bloomberg L.P.

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