Mainland China: President Xi promotes green development at China’s 20th Communist Party Congress

On 16 October 2022, President Xi gave a two-hour opening speech to the 20th Central Committee of the Communist Party of China in which one of the objectives he spoke of was the need to progress China’s transition to a green and low-carbon economy.

In his speech, President Xi stated “We should collectively promote decarbonisation, pollution mitigation, afforestation and reforestation. We need to prioritise ecosystem in our development, save our energy and resource, as well as facilitate green, low-carbon development …”.

In his speech, President Xi set out the need to:

• make improvements on the areas of fiscal, tax, financial, investment, pricing policies and systems of standards, to achieve a green and low-carbon economy;
• support green and low-carbon industries and improve the system for market-based allocation of resources and environmental factors;
• accelerate the research and development, application of advanced energy-saving and carbon emission reduction technologies, encourage green consumption, and promote green and low-carbon ways of production and life; and
• establish mechanisms to realise the market value of ecosystem goods and services and improve the compensation system for ecological conservation.

Since the announcement made by President Xi in 2020 to reach carbon peak emissions by 2030 and carbon neutrality by 2060, the Chinese government have been making significant policy developments to meet these targets. We saw in late October 2021, and ahead of COP26, the State Council of China issue the “Working Guidance for Carbon Dioxide Peaking and Carbon Neutrality in Full and Faithful Implementation of the New Development Philosophy” and the “Action Plan for Carbon Dioxide Peaking Before 2030” – essentially a roadmap as to how China will meet its carbon-neutrality targets (see here). We have seen regulatory developments in this space during the course of 2022 (examples can be found here) and China published their first ESG disclosure standards in June 2022 (see here). As reported in the press, what is an interesting observation is that this was the first mention at a party congress of China’s climate goals since President Xi’s announcement in 2020.

“Harmony between humanity and nature”

President Xi spoke of the “Beautiful China Initiative” stating that “adapting to, and protecting nature is essential for building China into a modern socialist country in all respects”. President Xi continued to refer to taking a “holistic and systematic approach to the conservation and improvement of mountains, waters, forests, farmlands, grasslands, and deserts.” He went on to say that China will prioritise ecological protection, conserve resources and use them efficiently, and pursue green and low-carbon development, as well as pledging to generally eliminate serious air pollution.

Although a push on renewables, continued reliance on coal

In recent years, China’s government has been actively promoting the use of renewable energy as part of a wider effort to address pollution concerns and comply with China’s international commitments with respect to reduction of carbon emissions and is currently on track with its stated targets. For a country generating the most carbon emissions in the world, the targets to hit peak carbon emissions by 2030 and achieve carbon neutrality by 2060 are perceived to be ambitious and should, in particular, boost investment in “green” industries such as renewable energy, waste treatment and/or related technologies. 

However, although President Xi reiterated China’s aim to accelerate into clean energy he also stated that China will continue to rely heavily on its old coal-based system. Given the energy and food crisis unfolding across the globe since Russia’s invasion of Ukraine in February this year, China, as with other countries and regions, has been confronted with the need to rebalance actions around energy security versus its carbon-neutral commitment.

China has experienced extreme weather events this year linked to climate change such as heatwaves and droughts, as well as coastal flooding, erosion and storm surges. China has also suffered from several power crises, including a power shortage last autumn that led more than half of its provinces to halt production.

President Xi spoke of the principle of “establishing the new before demolishing the old” referring to the objective to establish a reliable, renewable-based energy system before cutting the use of fossil fuels, with coal to be used in a cleaner and more efficient way.

With coal remaining in the energy mix in the foreseeable future, China will actively promote the use of carbon capture, utilisation and storage (CCUS) to help remove the emissions from coal consumption.

Stakeholder engagement

The references in President Xi’s speech to “common prosperity” and “harmony between humanity and nature” in “Chinese-style modernization” does focus attention on environmental, social and governance (ESG) matters – which suggests a greater emphasis on corporate social responsibility and on engagement by Chinese businesses of their stakeholders. The expectation and requirements from the Chinese government around “wealth accumulation” reform and carbon footprint reduction supports this direction.

We will wait to see if China makes any further commitments at the upcoming COP27.