China’s carbon-neutral plan lacks urgency and transparency, EU chamber report says

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A sense of urgency appears to be lacking in China’s low-carbon push, according to a leading European business association that is calling for policy predictability and a detailed road map to counter Covid-related disturbances while striking a balance with China’s need to ensure energy security.

In its report, Carbon Neutrality: the Role of European Business in China’s Race to 2060, released on Wednesday, the European Union Chamber of Commerce in China noted that the lack of an action plan for reducing the nation’s dependency on fossil fuels would delay its green transition and ultimately hurt its competitiveness.

“We are a little bit worried that the Covid situation might trigger a delay in implementing the carbon-neutrality targets and measures that China has been planning so far,” the chamber’s president, Joerg Wuttke, said at media roundtable discussion about the report.

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It also called for industry- and local-level guidance, details about relevant policy tools, and a clear fossil-fuel exit strategy to help companies make well-informed investments that factor China’s plans into their own global corporate decarbonisation strategies.

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“The world is not waiting for China to resolve its Covid challenge,” Wuttke said. “They move on, and China runs the risk of falling behind and losing the competitive advantage they had.”

China is aiming to see carbon dioxide emissions peak by 2030, and it hopes to be carbon neutral by 2060. The push is expected to create tens of trillions of yuan worth of low-carbon investment opportunities in the coming decades.

According to an outline released in November, Beijing aims to raise the share of non-fossil-energy consumption to around 20 per cent by 2025, then to 25 per cent by 2030 and to more than 80 per cent by 2060.

But action plans with concrete solutions for achieving the decarbonisation goals across specific sectors – including solar, hydrogen, coal, steel, low-carbon technology, construction and transport – need be “rapidly fleshed out”, the report said.

“It is a hurdle in investment if you don’t have a clear road map,” Wuttke said. “Businesses are reluctant to take risks associated with possible policy changes. Predictability is absolutely crucial to making investments in sometimes more expensive equipment, services and systems, to get to a carbon-neutral stage.

“So, the difficulty we see sometimes is not just that we are having to put the rubber on the road over here – it is also that we have to put it in action, not according to a Chinese timetable, but because of the [corporate] headquarters’ timetable.”

Earlier this year, President Xi Jinping played up the urgency and difficulty of achieving China’s climate targets for the coming years, saying it is “not something we are told to do, but something that we must do”.

But to do it properly, China’s green push must also feature policy consultations with businesses and NGOs, according to Wednesday’s report.

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Power cuts amid last year’s energy crisis prompted many companies to invest in diesel generators to mitigate manufacturing disruptions. But because of these types of moves, “the good aim of reducing emissions actually might lead to more emissions”, Wuttke said.

More than a third of companies surveyed for the report agreed that China could cooperate with the European Union in formulating a coordinated and practical net-zero emissions plan, the results showed.

Meanwhile, vows by China’s leaders to prioritise energy security, especially in a time of global market turmoil, appear to be casting doubt on decarbonisation efforts and progress in the short term.

“While energy security is extremely important, it should be balanced against the severe costs of neglecting effective measures to keep China on the path to carbon neutrality by 2060,” the report said.

Last year’s power crisis also showed that carbon targets cannot be met with a one-size-fits-all approach, and policy transparency should be assured, the report added.

China, the world’s top CO2 emitter, accounted for about 31 per cent of global emissions in 2020, according to official and industrial data. And the nation relies on fossil fuels to generate more than 80 per cent of its energy, compared with more than 70 per cent for the European Union.

At the centre of the green transition is how China will reduce industrial dependency on cheap coal while maintaining energy security, which the report identified as the biggest challenge in the nation’s carbon-neutrality push.

“However, the ‘phasing down’ of coal will only start from 2026, as China priorities economic stability in light of recent geopolitical tensions and the impact of Covid-19, as well as in response to disruptions that were experienced in the second half of 2021 due to power cuts,” the report said.

Wind and solar make up more than half China’s added power capacity

China’s coal output reached a record high of 4.07 billion tonnes last year, and the country has approved new coal-mining projects since late last year to ensure enough supply.

To help prop up the faltering economy, China plans to boost coal-production capacity by 300 million tonnes this year, raising concerns about how this could affect Beijing’s decarbonisation push.

The EU chamber report also called on Beijing to lift barriers preventing market access to green technologies; to raise public awareness; to build green value chains to drive down costs; and to establish shared standards.

“European companies have deployed effective decarbonisation technologies in their home markets and want to work with China to help it quickly front-load, presenting a strong argument for deepening European Union-China industrial cooperation,” the report said.

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