Why China needs a carbon cap to achieve net zero by 2060
By Kelly Sims Gallagher and Amy Myers Jaffe
China’s leaders are meeting this week to set the country’s long-term goals. An important element of the process will be the country’s next Five-Year Plan (FYP), which provides a roadmap and window into China’s vision for itself and its economy. This year’s FYP is particularly significant for the world because it will explain how the Chinese government plans to reach its newly announced target of zero net carbon emissions by 2060. Previous plans have emphasized the need for China to promote technology innovation self-sufficiency including in the important area of energy as well as to set targets for non-fossil energy, energy efficiency, coal caps, and carbon intensity. New energy technology, including electric and automated cars, renewable energy, and batteries, featured widely in China 2025, the country’s widely disseminated industrial plan. China’s 12th FYP targeted new energy vehicles as one of seven strategic industries, allocating billions of dollars to their development and promotion.
China’s recent announcement that it is aiming to achieve carbon neutrality before 2060 has created a stir in international climate circles. Defining net zero targets is an enormous undertaking now being taken up by major economies and large corporations alike. Getting to net zero is a daunting task, and it depends on near term action. For those countries who have not yet peaked emissions, such as China, the most urgent task is to bend the curve downward. Because China has not yet reached its peak, a carbon cap is crucial for China’s 14th FYP. To achieve net zero by 2060, China not only must peak soon, it must then achieve a rapid pace of decarbonization, which is why China cannot allow a leisurely plateau in emissions to occur.
Sun Jinlong, party secretary, Ministry of Ecology and Environment, and Huang Runqiu, Minister of Ecology and Environment, recently outlined several steps China will take on its path to carbon neutrality. The ministry will draft and implement the 14th FYP Special Plan to Addressing Climate Change and develop effective monitoring and assessment mechanisms. The ministry will also draft an Action Plan for Peaking CO2 Emissions that will include recommendations for actions by local governments, sectors, and key industries. Importantly, China intends to create near-zero-carbon or even net-zero-carbon demonstration zones, in addition to expanding its current pilots for a national carbon market. The ministry will also develop a National Climate Adaptation Strategy for 2035.
Some of China’s top academic institutions broke ground on the challenging net zero analysis last week with the release of major scenarios studies on China’s low-carbon transformation pathways. One major study, entitled China Low-Carbon Development Strategy and Transformation Pathways” released by Tsinghua University Institute for Climate Change and Sustainable Development (ICCSD) in association with 18 other Chinese research institutes, stipulates that China’s electricity sector will need to get to zero emissions by 2050 and then shift to negative emissions such as bioenergy with carbon capture and storage (BECCS) and carbon sinks to offset emissions elsewhere in the economy. The study was designed to provide recommendations for energy conservation and carbon reduction targets and policies in the 14th FYP, provide recommendations for updating China’s 2030 Nationally Determined Contribution targets, and set recommendations for China’s strategy for long-term low emission development out to 2050.
In its projections for primary energy consumption under a long-term low-carbon 1.5 degrees development pathway, the Tsinghua study suggests coal use must fall to 5 percent of China’s electricity generation by 2050, with 90 percent of electricity supplied from non-fossil sources such as nuclear and renewables. Share of electricity in total end-use energy consumption increases from 25 percent today to 68 percent by 2050, with non-fossil energy representing 85 percent of total primary Chinese energy demand. According to the study’s various scenarios, moving from a 2 degrees pathway to a 1.5 degrees pathway will require a shift to hydrogen as an energy carrier in the industrial sector, transport sector, and power sector as well as a scaling up of negative emissions technologies and carbon sinks. To achieve a 1.5 degrees pathway will require new investment of up to 2.5 percent of annual Chinese GDP, considerably higher than what is projected for Europe’s Green Deal spending as a percentage of EU GDP.
In its policy recommendations for the 14th FYP, the Tsinghua study suggests ambitious energy saving strategies are needed, including a ten-year plan for peaking emissions. Importantly, recommendations include strict control of coal use, including efforts to peak coal consumption or even achieve negative coal growth during the next five years. The share of non-fossil energy is suggested to rise to 20 percent versus 15 percent in the 13th FYP. It recommends China adopt a reduction in CO2 intensity per unit of GDP of more than 65 percent in 2030 compared to 2005 levels for its next NDC target, up from 40 to 45 percent in its 2020 NDC pledge. To reach this target, China’s primary energy mix would need to be 45 percent coal (down from 51 percent in 2020), 17 percent oil (down slightly from today), 13 percent natural gas (up from 8 percent in 2020) and 25 percent renewables (up from 16 percent in 2020), according to the Tsinghua’s scenario analysis. Such targets would have striking ramifications for global energy markets. Many energy exporters have been counting on China to sell increased levels of oil and gas output in the next few years. Without that prop, global oil and gas prices might see lower long term averages. Chinese forest stock is suggested to expand by 5.5 to 5.6 billion m3 by 2030 compared to 2005 levels. The study authors emphasized that to achieve net zero carbon emissions by 2050, breakthroughs in zero emission or negative emissions technologies will be needed, including direct air capture or other carbon removal technology.
A second study from Tsinghua’s Institute of Energy, Environment and Economy (Tsinghua 3E) allows for greater coal use in 2050 but also assumes no coal in the power sector without carbon capture and storage after 2050.
These new Chinese projections should come as no surprise. Climate Policy Lab research concluded that China would be able to peak its carbon emissions by 2030 and achieve 20 percent level of non-fossil energy through its current range of policies and targets. We found that power sector reform is fundamental to China’s efforts to peak its carbon emissions as well as reform of China’s emissions trading system and strengthening energy efficiency. The country will need a combination of policies to achieve its more ambitious targets including industrial transformation and greater industrial efficiency, carbon pricing, and ambitious light and heavy-duty vehicle standards. Power sector reforms must ensure that electricity pricing schemes that favor incumbents do not continue to put coal plants in a favorable position. We find that efficiency standards for coal-fired power plants and industry will remain important policy tools in the next decade in China.
China’s leaders have set an important tone for global cooperation on decarbonization with President Xi Jinping’s dramatic announcement on carbon neutrality goals at the General Debate of the 75th Session of the General Assembly. The policy choices of its 14th FYP will be instrumental in laying out China’s vision for how to achieve deep decarbonization without sacrificing economic growth. The Tsinghua study suggests China can still reach its deep decarbonization goals while experiencing GDP in 2050 that is 3.5 times higher than that of 2020. China’s energy choices will have dramatic impacts on oil and gas markets in the coming years, as well as on the trajectory of global climate negotiations. As political debates about carbon border adjustments gain momentum in Europe, and possibly the United States depending on national election outcomes, the next year could be a pivotal one for global climate policy.
Kelly Sims Gallagher is the Academic Dean and a Professor of Energy and Environmental Policy at The Fletcher School. Amy Myers Jaffe is the Managing Director at Climate Policy Lab and Research Professor at The Fletcher School.