China issues action plan for achieving carbon peak emissions and carbon neutrality ahead of COP26

In October 2021, ahead of the start of COP26, the State Council of China (in conjunction with the Central Committee of the Communist Party of China) published:

• The Working Guidance for Carbon Dioxide Peaking and Carbon Neutrality in Full and Faithful Implementation of the New Development Philosophy (中共中央、国务院关于完整准确全面贯彻新发展理念做好碳达峰碳中和工作的意见) (the “Guidance”), and
  
  
• The Action Plan for Carbon Dioxide Peaking Before 2030 (2030年前碳达峰行动方案) (the “Action Plan”).

The Guidance and Action Plan are dated 22 September 2021 and 24 October 2021, and were released to the public on 24 October 2021 and 26 October 2021, respectively.

Following President Xi Jinping’s announcement in September 2020 that China intends to hit peak carbon emissions by 2030 and carbon neutrality by 2060, the Chinese government has been formulating an “1+N” policy framework – “1” stands for an overarching plan to achieve both peak carbon emissions and carbon neutrality while the “N” stands for different action plans to help achieve these targets in various sectors. Over the last year, we have seen the development of policies relating to this topic across different sectors issued by ministerial or other levels of the government, but there has been no overarching guidelines until the Guidance and Action Plan was announced last month.

The Guidance, which lays out specific targets and measures for both reaching peak carbons emissions by 2030 and carbon neutrality by 2060, is the “1” in the equation and is a quasi-constitutional set of guidelines. The Action Plan is an essential part of the “N” as it sets out the main objectives for the following two “Five-Year” periods to achieve peak carbon emissions by 2030.

The Guidance

The Guidance, essentially:

• sets out the key objectives around establishing (i) a green, low-carbon and circular economy and (ii) a clean, low-carbon, safe and efficient energy system by 2025, 2030 and 2060;
• stresses the need for a comprehensive green transformation in economic and social development; and
• sets out the proposed approaches to achieving such objectives (which summarises the steps set out below under the Action Plan).

The Action Plan

The Action Plans sets out the key milestones and a ten-point road map for hitting peak carbon emissions by 2030.

The Action Plan sets out the following headline targets:

• by 2025, the share of non-fossil fuels in total energy consumption will reach around 20%, while energy consumption and carbon dioxide emissions per unit of GDP will drop by 13.5% and 18%, respectively, compared with 2020 levels;
• by 2030, the share of non-fossil fuels in total energy consumption will reach around 25%, and carbon dioxide emissions per unit of GDP will have dropped by more than 65% compared with 2005 levels; and
• by 2030, total installed generation capacity of wind and solar power will reach above 1200 GW.

The headline targets are aligned with those announced by President Xi Jinping in September last year that mainland China would strive to hit peak carbon emissions by 2030 and achieve carbon neutrality by 2060. For a country generating the most carbon emissions in the world, these targets are perceived to be ambitious and should, in particular, boost investment in “green” industries such as renewable energy, waste treatment and/or related technologies.

The Action Plan sets out the following ten key actions to achieve hitting peak carbon emissions by 2030:

1. Transition to green and low-carbon energy – which focuses on reducing coal consumption; “vigorously developing” renewable energy through large-scale wind and solar power projects, biomass, geothermal and marine energy; developing hydropower (particularly in south west China); developing nuclear power (including demonstration projects for advanced reactor nuclear power); regulating the consumption of oil and gas (including promoting alternative sustainable fuels); and increasing the pace of the development of the new electricity power system (including optimising electricity transmission and distribution, energy storage and speeding up the development of a unified national electricity market).

2. Energy saving measures, improving energy efficiency and methods to mitigate carbon emissions - which focuses on implementing measures to monitor the carbon emissions of “key energy users” and encourage energy-saving technologies; supporting energy conservation and carbon reduction projects across different sectors; raising energy efficiency standards on equipment; and improving energy efficiency of data centres and digital infrastructure.

3. Peaking carbon dioxide emissions in the industry sector – which focuses on promoting green and low-carbon development in the industrial domain; pushing the steel industry, the non-ferrous metal industry, the building materials industry and the petrochemical industry to peak carbon dioxide emissions and “firmly curbing the irrational expansion of energy-intensive and high-emission projects”.

4. Peaking carbon dioxide emissions in urban-rural development area – which focuses on promoting green and low-carbon transformation of urban and rural areas; quickening the pace of improving the energy efficiency of buildings so that by 2025 all new buildings would be built according to green standards, including increasing the use of small scale renewable energy in heating/cooling systems; and promoting a low-carbon transition in the development of rural areas.

5. Promoting green and low-carbon transportation – which focuses on promoting low-carbon vehicles so that by 2030 40% of new vehicles would be powered by clean energy; developing green, high efficiency transportation systems; and accelerating the construction of the infrastructure required.

6. Promoting a circular economy – which focuses on requiring industrial parks to develop in line with the concept of a circular economy; improving the use of bulk solid waste; refining systems for resource recycling and “vigorously promoting” efforts to reduce and recycle household waste.

7. Advancing green and low-carbon technology innovation – which focuses on putting in place mechanisms and systems which encourage the development of innovative low-carbon technologies; boosting the talent pool, training and capability; launching “major national projects for forward-looking, strategically important cutting-edge technologies …”; and accelerating the research and development of innovative low-carbon technologies.

8. Consolidating and enhancing the carbon sink – which focuses on consolidating the carbon sequestration capacity of ecosystems; enhancing the carbon sink capacity of ecosystems; strengthening the foundation for ecological system carbon sinks; and promoting carbon emissions reduction and carbon sequestration in agriculture and rural areas.

9. Green and low-carbon society – which focuses on strengthening publicity and education; advocating green and low-carbon living patterns; encouraging enterprises to fulfill their social responsibilities; and increasing training.

10. Promoting all regions peaking carbon dioxide emissions hierarchically and orderly – which focuses on setting sound, systematic targets; promoting green and low-carbon development according to local conditions; formulating local peaking carbon dioxide emissions plans through coordination between central and local authorities; and carrying out pilot projects.

In addition to the ten key actions, the Action Plan also includes a commitment to “uphold multilateralism, safeguard the UN-centered international system, and urge all parties to fulfill the United Nations Framework Convention on Climate Change and the Paris Agreement” and to “intensify green finance cooperation across the world, actively participate in carbon pricing and global macro policy coordination on green finance standards”. There is also a statement that the Belt and Road Initiative will be a green initiative. Further to the launch of China’s first national carbon emission trading scheme on 16 July 2021, the Action Plan refers to building on the carbon trading system which has been put on place (see here).

The Guidance and the Action Plan builds on the 14th five-year plan (the “14th FYP”) for 2021 to 2025 adopted by the Central Government in March 2021 which reinforces the need to expedite the development of non-fossil energy, and to build a modern energy system. This system encompasses increasing wind and solar energy, optimising electricity transmission, energy storage, hydrogen, carbon capture, utilisation, and storage (CCUS) and digitalisation. The Guidance and the Action Plan also reinforce the State Council’s plans for China’s carbon targets which were laid down by the NDRC in February 2021 - these plans include stepping up the country’s push for research into large-scale power storage technology, and highlighting wind and solar, geothermal, hydrogen, biomass, tidal energy and hydropower as priority renewable sectors. Despite President Xi Jinping’s announcement on 21 September 2021 at the United Nations General Assembly that China would not build new coal-fired power projects abroad, the Action Plan and Guidance stopped short of any firm commitments to reduce reliance on coal domestically (see here).

The Action Plan and the Guidance do not set out in any detail is a timeline on how much emissions would increase before 2030 and how fast they will decline after. The statement made by President Xi Jinping at the opening of COP26 confirmed that following the issuance of the Guidance and Action Plan, “specific implementation plans for key areas such as energy, industry, construction and transport, and for key sectors such as coal, electricity, iron and steel, and cement will be rolled out, coupled with supporting measures in terms of science and technology, carbon sink, fiscal and taxation, and financial incentives. Taken together, these measures will form a "1+N" policy framework for delivering carbon peak and carbon neutrality, with clearly defined timetable, road map and blueprint”. 

The next steps will be one to watch, although the Joint Statement issued on 10 November 2021, by the US and China setting out the various climate actions they plan to cooperate on emphasises that climate action needs to happen this decade/in the 2020s (see here).