Beijing's pivotal commitment to carbon peak & carbon neutrality
The floodgates of support for renewable energy have been opened
Before we start, the Pekingnology newsletter was recently featured in a Bloomberg News story with a photo of your Pekingnologist.
The last newsletter detailed the platform economy part of the ninth meeting of the Central Committee for Financial and Economic Affairs. As noted then, the other part of the meeting, chaired by General Secretary Xi Jinping, was about carbon reduction - the topic in this newsletter.
1) The promise of striving to achieve carbon peak by 2030 and carbon neutrality by 2060, known here as “3060”目标 Goal 3060, has been elevated to the level of relating to the sustainable development of the Chinese nation. Don’t underestimate Beijing’s resolution on this.
2) The floodgates for support renewable energy, at least by means of favorable financing, have been opened. Supporting renewable energy is now NOT just a regulatory, technical or financial requirement, but a political one.
3) In another unrelated matter, your Pekingnologist sees U.S. sanctions on Chinese solar companies coming.
Here is the March 15 meeting readout in Mandarin and the English summary of the readout by Xinhua (disclosure: where your Pekingnologist works in the day and usual disclaimers apply).
Let’s go over the part on carbon reduction sentence by sentence. The readout said 习近平在会上发表重要讲话 Xi Jinping delivered an important speech at the meeting.
The meeting heard reports from the National Development and Reform Commission, the Ministry of Ecology and Environment, and the Ministry of Natural Resources on the general thoughts and main initiatives to achieve carbon peaking and carbon neutrality.
These three ministries likely play a lead role in mapping out the roadmap to carbon peak and carbon neutrality.
NDRC is generally known in English as the top economic planner taking a macroeconomic view. 国家能源局 The National Energy Administration which has jurisdiction over fossil fuels, renewable energy as well as electricity, is under the NDRC.
The Ministry of Ecology and Environment is in charge of environmental protection including regulating pollution.
The Ministry of Natural Resources regulates, well, natural resources, and also counts 国家林业和草原局 the National Forestry and Grassland Administration under its wings. Chinese environmental protection and carbon emission reduction work has always emphasized using natural lands to absorb carbon dioxide - the most simplistic example being plating a lot of trees.
The meeting stressed that China strives to achieve carbon peak by 2030 and carbon neutrality by 2060, which is a major strategic decision made by the Party Central Committee after careful consideration and relates to the sustainable development of the Chinese nation and the building of a community with a shared future for mankind.
“A major strategic decision made by the Party Central Committee after careful consideration,” says it is not out of impulse or made easily, also suggesting it will NOT be reversed
The English translation may not convey the seriousness of the words in Mandarin 中华民族永续发展 “the sustainable development of the Chinese nation,” which is quite heavy stuff, and basically means it’s good for ourselves.
“The building of a community with a shared future for mankind” means it’s good for our interactions with and participation in global affairs.
So overall, China “strives to achieve carbon peak by 2030 and carbon neutrality by 2060” is for our own good, not out of pressure from the outside; and it’s a big overarching goal.
We shall unswervingly implement the new development philosophy; adhere to the system approach; coordinate development with emission reduction, the overall with the local, the short-term and the medium and long-term; be guided by the overall green transformation of economic and social development; hold green and low-carbon energy development as the key; accelerate the formation of resource conservation and environmental protection in industrial structure, mode of production, lifestyle, and spatial pattern; unswervingly take the high-quality development path which priorities ecology, green(ness), and low-carbon.
For 新发展理念 new development philosophy, refer to the Feb. 25 Pekingnology newsletter on the “spirit” of the 5th Plenum, which in short is 创新、协调、绿色、开放、共享, innovative, coordinated, green, open and shared (development).
系统观念 the system approach is a word that is often used in Chinese politics to say something, usually pretty important and having overall importance, should be thought of and dealt with from all levels and all aspects with the big picture in mind. There is an article on the system approach from the vice minister of civil affairs on the People’s Daily in Mandarin.
处理好发展和减排、整体和局部、短期和中长期的关系 coordinate development with emission reduction, the overall with the local, the short-term and the medium and long-term are about the delicate balances that the work towards carbon peak and carbon neutrality have to strike: faster development usually means more emission, but you can’t stop economic growth, but you also can’t don’t give a damn to emission while, say, building steel mills.
加快形成节约资源和保护环境的产业结构、生产方式、生活方式、空间格局accelerate the formation of resource conservation and environmental protection in industrial structure, mode of production, lifestyle, and spatial pattern each of the last four words mean something.
产业结构 industrial structure could mean that, for example, in percentages of economic output, How many should be in heavy industries? How many in agriculture? How many in services? It could refer to that the economic landscape shall be guided towards a composition that is more low-carbon.
生产方式 mode of production is a bit confusing to your Pekingnologist. On one hand, it could very well be the classical term in Marxism (ENG, Wikipedia); on the other, it could mean something narrower, like the way of producing - for example, the production of something used to emit a lot of carbon, should now go to lower-carbon means.
生活方式 lifestyle is more easily understandable and can lead to changes that are closer to everyday lives and businesses. For example, will regulators dislike bigger cars? How much more spending will there be to promote public commute? Government policies can have an easy influence on that.
空间格局 spatial pattern at the first thought could help shape China’ urbanization approach. As is probably known, Chinese rural residents have been leaving their farmlands, but where should the government guide them to? Should they be guided to 县 counties or 市 cities? From the perspective of lowering carbon emissions, which one is better: megacities like Tokyo or city clusters like those near Shanghai or Shenzhen?
We shall adhere to national coordination; strengthen the top-level design, give full play to the advantages of our system/governance model, make all parties take responsibilities, and devise policies based on local situations.
We shall put the conservation of energy and resources in the first place, implement a a comprehensive conservation strategy, advocate a simple and moderate, green and low-carbon lifestyle.
NOTE: This is quite clear and doesn’t need many explanations, with perhaps far-reaching implications for consumer products and services that have yet to be understood. For example, will smaller (maybe Japanese?) cars be encouraged at the expense of bigger (American-style?) cars?
We shall use the force of “two hands” - both the government and the market, strengthen innovation in science and technology and institutions, deepen the reform of energy and related fields, and form a mechanism of effective incentives and constraints.
NOTE: Low carbon results get rewards (incentives), high carbon gets punishments (constraints).
We shall strengthen international exchanges and cooperation, and effectively coordinate domestic and international energy and resources.
NOTE: “effectively coordinate domestic and international energy resources” sounds like balancing China’s energy and resources sourcing to help meet carbon goals.
We shall strengthen risk identification and control, deal with pollution reduction and carbon reduction‘ relationship between energy security, industrial and supply chain security, food security, and the normal life of the masses.
NOTE: The risk from carbon reduction on energy security, industrial and supply chain security, food security, and the normal life of the masses must be controlled. In January 2018, Hebei Province had to halt the coal to gas heating conversion project (ENG, Reuters), which had been planned to clamp down on pollution from coal. The reason? The supply of gas was insufficient and households couldn’t afford other heating sources besides coal.
The meeting pointed out that the "14th Five-Year Plan" (period, 2021-2025) is a critical period and window period for carbon peaking, so we shall focus on the following tasks.
NOTE: Below is what’s gonna happen in the next five years.
We shall build a clean, low-carbon, safe and efficient energy system, control the total amount of fossil energy, focus on improving the efficiency in the use (of enery), implement the action (plan) of renewable energy as replacement, deepen the reform of the electricity system, and build a new electricity system that counts new energy as the main body.
NOTE: Latest numbers suggest the contribution to China's total power capacity by coal, traditionally the dominant power source, fell to 49.1% in 2020, according to China Electricity Council via People’s Daily‘s front page, marking the capacity from coal dipping below 50% for the first time.
We shall implement action (plan) to reduce pollution in key industry sectors, promote green manufacturing in industrial sectors, improve energy efficiency standards in the construction sector, and accelerate the formation of green, low-carbon transport in the transportation sector.
NOTE: The three key sectors have been named: industry, construction, and transportation. Agriculture appears to have been consistently missing from China’s carbon agenda.
We shall promote green, low-carbon technology to achieve major breakthroughs, urgently deploy the frontier technology research in low carbon, accelerate the promotion and application of pollution reduction and carbon reduction technologies, and establish and improve the service platforms for green, low-carbon technology assessment, trading system, and science and technology innovation .
NOTE: What would count as major breakthroughs in low-carbon tech? What is frontier tech on this?
We shall improve the green, low-carbon policy and market system, improve the "dual control" of energy system, improve fiscal, tax, pricing, financial, land, government procurement and other policies that are conducive to the green, low-carbon development of , accelerate the promotion of carbon emissions trading, and actively develop green finance.
NOTE: The "dual control" of the energy system means control of both 能源消费总量energy consumption total and 能源消费强度 energy consumption intensity. The “dual control” in itself is not new. But how to “improve” it is not specified in the meeting readout.
A lot of policies are coming. This newsletter will get to one of them later.
We shall promote green, low-carbon life, oppose luxury and waste, encourage green travel, and create a new fashion of green low-carbon life.
NOTE: It can start with, well, encourage ordering fewer dishes at restaurants, expand public transportation in cities, promote recyclable materials in clothes/packages, to perhaps much larger consumer patterns.
Your Pekingnologist wishes to add that even without the consideration for carbon, conservation of resources and modesty in lifestyles have always been culturally promoted in China.
For example, around October 2020, the official encouragement of mealtime thrift was reported more tilting the food security perspective (ENG, Washington Post) which is NOT unfair. But it could have included more nuance in the Chinese culture’s long-standing preference for modesty and conservation.
We shall enhance the capacity of carbon sink, strengthen the spatial planning, use, and control of homeland, effectively enable forests, grasslands, wetlands, oceans, soil, and permafrost to play the role of carbon sequestration, and enhance the incremental amount which the carbon sink in the ecosystem stores carbon.
NOTE: Forests, grasslands, wetlands, oceans, soil, and permafrost are likely to be under increased protection from industrial and commercial development.
We shall strengthen international cooperation in addressing climate change, promote the development of international rules and standards, and build the Green Silk Road.
NOTE: A lot is on the shoulder of Xie Zhenhua, the veteran climate negotiator well-respected internationally.
Xie's appointment as China's special envoy for climate change affairs shows that the Chinese government attaches great importance to the work on climate change, said China’s Foreign Ministry (ENG, Xinhua). That statement is indeed rare - the appointment of somebody itself shows the Chinese government attaches great importance.
The meeting stressed that achieving carbon peak and carbon neutral is a hard battle and a big test for our Party's governance capacity.
NOTE: Beijing knows it is an arduous task. But chalking it up to a big test of our Party's governance capacity also shows its resolution. Nobody wants to fail that, would they?
We shall strengthen the collective, centralized leadership of the Party Central Committee and improve the supervision and assessment mechanism. Party committees and governments at all levels should shoulder their responsibilities, and have goals, measures, and assessments.
NOTE: Again, the political commitment is huge - this is something that has the attention of the Party Central Committee, so Party committees and governments at all levels should shoulder their responsibilities.
If they don’t, well, there is a precedent at the National Energy Administration in January, as told in a Twitter thread by Lauri Myllyvirta, lead analyst at the Center for Research on Energy and Clean Air, and well-covered by the Wall Street Journal’s Sha Hua.
Leading cadres should strengthen learning the knowledge related to carbon emissions and enhance their ability to grasp green and low-carbon development.
NOTE: This is an explicit call to Party and government officials to learn more about carbon emissions, in a way recognizing that they perhaps have been quite unfamiliar with the issue.
One of your Pekingnologists’ concerns for China’s carbon reduction is that the issue appears to have been 上热下冷 hot at the above, cold at the below - the top leadership is more engaged and attentive, but the state apparatus at the lower level and people on Main Street have yet to catch up.
You are welcome to buy me a coffee or pay me via Paypal. All the money goes to Zichen Wang’s personal account. Full disclosure: you are paying a natural person who Twitter calls “China state-affiliated media.”
China’s State Council, or the cabinet, in late March, specified priorities in the government work report (ENG, Xinhua) adopted in the annual National People’s Congress session in early March. There is one paragraph on carbon peak and carbon neutrality:
(26) to do a solid job of carbon peak, carbon neutral work.
30. Develop an action plan for carbon emission peaking by 2030. Optimize the industrial structure and energy structure. Promote the clean and efficient use of coal, vigorously develop new energy, and actively and orderly develop nuclear power under the premise of ensuring safety. Expand the scope of preferential corporate income tax catalogs for environmental protection, energy and water conservation, promote the research and development and application of new energy-saving and environmental protection technologies, equipment and products, cultivate and expand energy-saving and environmental protection industries, and promote the economical and efficient use of resources. Accelerate the construction of a national energy-use rights and carbon emissions trading market, and improve the dual control of energy consumption. Enhance the capacity of carbon sink in the ecosystem. Take practical action to make due contribution to the global response to climate change. (National Development and Reform Commission, Ministry of Ecology and Environment, Ministry of Foreign Affairs, Ministry of Science and Technology, Ministry of Industry and Information Technology, Ministry of Finance, Ministry of Natural Resources, Ministry of Transport, Ministry of Housing and Urban-Rural Development, People's Bank of China, State Taxation Administration, State Administration of Market Regulation, CBIRC, National Energy Administration, State Administration of Science, Technology and Industry for National Defense, National Forestry and Grassland Administration, etc. are responsible according to their respect responsibilities throughout the year)
NOTE: Sixteen central government ministries/administrations are involved. As noted above, there the carbon reduction work so far doesn’t appear to involve agriculture - no mentioning of the Ministry of Agriculture and Rural Affairs here.
Implement special policies for financial support for green, low-carbon development. Set up carbon emission reduction support tools. (led by the People's Bank of China, the Ministry of Ecology and Environment and others are responsible according to their respect responsibilities. Introduce relevant policies by the end of June and continue to promote the work throughout the year)
Well, some of the support is already here.
Your Pekingnologist would also like some! Welcome to buy me a coffee or pay me via Paypal. All the money goes to Zichen Wang’s personal account. Full disclosure: you are paying a natural person who Twitter calls “China state-affiliated media.”
On March 12, the National Development and Reform Commission together with the Ministry of Finance, the People's Bank of China, China Banking and Insurance Regulatory Commission, and National Energy Administration published a notice, dated Feb. 24, on 关于引导加大金融支持力度促进风电和光伏发电等行业健康有序发展的通知 (CHN, NDRC) guiding and increasing financial support to promote the healthy and orderly development of wind power, photovoltaic power, and other sectors.
The notice calls for, first of all, 充分认识风电和光伏发电等行业健康有序发展的重要意义 fully understanding the importance of the healthy and orderly development of wind power, photovoltaic power, and other industries.
It is followed by concrete measures such as
Financial institutions shall, in accordance with the principles of commercial practice, negotiate the extension or renewal of loans with renewable energy enterprises.
For renewable energy enterprises under relatively big short-term repayment pressure but having future development prospects, financial institutions can, extend the loan, renew the loan, or adjust the repayment schedule, duration, and other arrangements, in accordance with the principle of risk control, based on the independent negotiation between banks and enterprises and according to the actual and expected cash flow of the funded projects.
金融机构按照市场化、法治化原则自主发放补贴确权贷款。已纳入补贴清单的可再生能源项目所在企业，对已确权应收未收的财政补贴资金，可申请补贴确权贷款。Basically, if the renewable energy projects have been confirmed to be included in the government subsidy list, but the government subsidy has yet to be delivered, the company can apply for a loan in the same amount of the government subsidy.
There are other concrete clauses so you might want to look them up (CHN, NDRC).
The notice ended by again calling on financial institutions to
Enhance the sense of responsibility and prevent and resolve risks.
Banks and relevant financial institutions should fully understand the importance of the renewable energy industry to the building of ecological civilization in China and the fulfillment of international commitments, establish the sense of the big picture, enhance the sense of responsibility, help enterprises to effectively resolve the risks in production, operation, and financial security, and promote the healthy and orderly development of the renewable energy industry.
On Thursday, March 22, the People’s Bank of China held 全国主要银行信贷结构优化调整座谈会 (CHN, PBoC) National Symposium on Optimization and Adjustment of Credit Structure of Major Banks, hosting 24 banks.
The central bank calls for
Around the realization of strategic goals in carbon peak and carbon neutrality, establishing carbon emission reduction support tools to guide banks to increase support for carbon emission reduction investment and financing activities in accordance with market-oriented principles, leveraging more financial resources to green, low-carbon sectors. Commercial banks should strictly implement green financial standards, innovate products and services, strengthen information disclosure, and adjust credit resource allocation in a timely manner.
At a work conference held at the Chinese Academy of Fiscal Sciences (ENG, Xinhua) on Tuesday, March 24, Han Zheng, Politburo Standing Committee Member and Vice Premier, stressed the importance to conduct policy research on finance and tax, again touching carbon peak and carbon neutrality:
Han Zheng stressed we shall adhere to the (calls of the) times, combine the long term and the short term, strengthen research on macro policy especially fiscal policy to better serve the decision-making of the Party Central Committee and the State Council . The current focus should be in-depth research and study around the realization of carbon peak and carbon neutrality (goals), as well as around improving the regulation of the real estate market, promote the standardized and healthy development of the platform economy,
Since the last paragraphs touch the solar industry, your Pekingnology feels compelled to say, based on recent development in the United States, his personal opinion that the U.S. will highly likely sanction Chinese solar companies, some of which are publicly traded, in the near future.
He wishes to be proven wrong, but the industry represented by the Solar Energy Industries Association (SEIA), the unions such as by AFO-CIO, the legislators such as Sens. Marco Rubio and Jeff Merkley, the media (such as a recent Washington Post editorial), and others (such as an “independent strategic consultancy” which produced a likely business-confidential report) have been working towards that. Of course, the overall atmosphere isn’t helping either.