Category Archives: Energy

Ukraine Crisis Will Slow China’s Economy

Charts showing impact of Ukraine crisis on China's GDP growth and inflation in 2022 and 2023. Source: The Conference Board

CHINA WILL NOT be immune from the global economic impacts of the Ukraine crisis.

Higher prices for energy and food and metals commodities — Russia and Ukraine are significant producers of all three — will raise inflation, providing a drag on real GDP growth. Almost certain recessions in Ukraine and Russia due to the fighting and sanctions, respectively, and an intensification of existing bottlenecks in global supply chains for raw and intermediate goods will exacerbate the impact.

It is too early to know the severity of these shocks, given their dependency on the outcome of the crisis. However, some scenario-based estimates are being made.

One set that crosses this Bystander’s desk comes from The Conference Board, a US business research organisation, which produced the chart above. Assuming an oil price averaging $125 a barrel in the second quarter of this year, The Conference Board estimates that China’s GDP growth for this year will be reduced by between point two and point five of a percentage point and by the same amount in 2023.

By comparison, the comparative numbers for the world economy are reductions of 0.4-0.9 percentage points and 0.1-0.3 percentage points, respectively.

Long-term energy contracts and the likelihood of buying more discounted Russian energy and agricultural commodities such as wheat that Moscow will not be able to sell into sanctioning markets will somewhat mitigate the impact on China. Nonetheless, the Conference Board is forecasting a 0.5-1.5 percentage points increase in year-on-year consumer price inflation in China for this year and a 0.1-0.8 percentage points increase in 2023.

Those will be unwelcome numbers for authorities already struggling to tame politically sensitive energy and food price rises.

The Ukraine crisis will add to the challenge of meeting the newly announced target of 5.5% GDP growth for this year. That was already looking ambitious. Headwinds from the real estate slump, the cost of the zero-Covid tolerance policy and the measures imposed by the United States to limit Chinese access to US capital, technology and intellectual property are already slowing the economy’s momentum.

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China Will Help Russia Economically But On Its Own Terms

Wheat infected by dwarf bunt virus. Photo credit: Peggy Greb, USDA Agricultural Research Service, licenced under Creative Commons Attribution 3.0 License.

THE TIMING OF the announcement by China’s customs authorities that they would approve all Russian wheat and barley imports — just hours after Russia launched its invasion of Ukraine — seems barely coincidental.

It also underlines how China is acting in its national interest as much as supporting its neighbour.

Presidents Xi Jinping and Vladimir Putin agreed to the end of the import ban when the latter attended the Beijing Winter Olympic Games earlier this month.

State media is suggesting that shows there is no connection between lifting the import ban and the invasion of Ukraine. However, that line raises more questions than it answers about how much Xi and Putin discussed Russia’s plans in advance.

Russia is the world’s largest wheat exporter, with around an 18% global market share. It has been excluded from the Chinese market because of concerns about introducing dwarf bunt fungus (seen in the photograph above) — a disease that can stunt wheat and other crops, reducing yields by up to three-quarters.

China often cites phytosanitary reasons to justify non-tariff barriers to trade, but the fungus is a serious threat; hitherto, China had zero tolerance for dwarf bunt spores in imported grain. Putin agreed that Russia would suspend wheat shipments to China if the contaminants were found.

For Russia, the agreement offered the reassurance of a secure buyer to mitigate possible Western sanctions. For China, it will mean a supply of cheap wheat to offset the looming shortages caused by flooding that disrupted last year’s sowing season across one-third of the country’s wheat acreage. Food security is a priority concern for Xi.

With 1.4 billion mouths to feed and rising use of wheat for animal feed, China is already the world’s largest wheat market, accounting for shy of one-fifth of the world’s consumption. It has somewhat opaque import quotas established when it first joined the World Trade Organization in 2001 that were intended to open up the market. Imports are running at well below allowable volumes. There is headroom to expand imports from Russia.

Some reports suggest that this new trade will be settled in yuan, not the dollars customary in commodities trading. That will be easier as some of the imported wheat will come from Chinese-owned farms in Russia’s Far East that up until now could only sell their produce in the domestic Russian market.

The two countries’ central banks agreed a three-year $24 billion currency swap in 2014 to facilitate trade financing in yuan. This has been renewed twice since. One effect has been to reduce the dollar’s share of financing of Russia’s exports to China from almost all of it in 2013 to around 40%.

In January, Russia’s state-owned Gazprom signed a 30-year contract to supply natural gas to China’s northeast from the Russian Far East. This will be priced in euros to avoid using dollars. Beijing insisted on favourable terms given Moscow’s desire to diversify its export markets for its energy since the sanctions imposed for Russia’s annexation of Crimea in 2014, which also produced a cut-price supply contract.

Russia has been building up its reserves of euros and yuan at the expense of the dollar since the imposition of the sanctions for annexing Crimea. Since 2017, the yuan’s share of Russia’s foreign-currency reserves has risen to 13% from 3% and the euro’s share to 32% from 22%, while the dollar’s share has fallen to 16% in 2021 from 46% in 2017.

The two countries’ central banks agreed a three-year $24 billion currency swap in 2014 to facilitate trade financing in yuan. This has been renewed twice since. One effect has been to reduce the dollar’s share of financing of Russia’s exports to China to around 40%, against almost all of it in 2013.

When they met earlier this month, Xi and Putin said they aimed to raise their countries’ bilateral trade to $250 billion from $140 billion last year. China will dictate the terms with a hard head more than a friendly heart.

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China’s COP Cop Out On Coal

CHINA HAS EMERGED from the COP26 climate summit in Glasgow relatively unscathed, given that it is the world’s top emitter of CO2.

As one of the world’s top two oil producers and exporters, Saudi Arabia took the early heat in Glasgow from activists pushing for an end to the use of fossil fuels. As attention swung to coal, the most polluting of fossil fuels and on which China remains heavily dependent for power generation, India, not China, was most prominent in watering down COP26’s final agreement.

At the last minute, the wording was changed from ‘phasing out’ the use of coal to ‘phasing down’, the same formulation that had appeared in the China-US climate dialogue agreement that the head of the Chinese delegation Xie Zhenhua and his US counterpart John Kerry had forged three days earlier.

Although Delhi put forward the revised wording to the final agreement, Beijing had been instrumental behind the scenes in getting the language changed, reportedly threatening to torpedo the final agreement if it was not. Washington lent its support by not offering any opposition.

Alok Sharma, the Conservative UK politician chairing COP26, offered an emotional apology subsequently, saying he was ashamed by the last-minute change and that China and India would have to justify themselves to the countries most vulnerable to climate change.

The glass-half-full view is that this is the first of the 26 rounds of COP meetings to make any formal commitment on coal. The half-empty view is that the compromise over phasing out its use belies the scale and urgency of the task.

Fatih Birol, executive director of the International Energy Agency, says that to reach the goal of limiting global heating to 1.5C, more than 40% of the world’s existing 8,500 coal plants would have to close by 2030 and no new ones built.

Last year, China commissioned more coal capacity than the rest of the world retired, according to a study by Global Energy Monitor. This US-based pro-green energy group that tracks fossil fuels says China commissioned 38.4 gigawatts (GW) of new coal plants in 2020, accounting for 76% of the global 50.3 GW new coal capacity and offsetting the 37.8 GW of coal capacity retired last year.

Facing disruptive energy shortages, China hit a new record for daily coal production during COP26. With the sixth plenum coinciding with the second week of COP26, it was inevitable that domestic concerns would be foremost for China’s delegation in Glasgow.

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Diesel Fuel Joins China’s Energy Shortages

DIESEL FUEL SHORTAGES are following China’s widespread electric power shortages as factories turn to diesel-powered generators to keep production going and wholesale prices higher than retail ones cause refineries to cut back production.

Petrol stations in many parts of China are reportedly rationing diesel, with lorry drivers reporting having to wait days in some cases to refuel, being limited to small quantities or being charged extra to fill up.

Lorries are the often overlooked underbelly of supply chains, so these latest fuel shortages and prices rises will put further pressure on already strained global supply chains.

Wholesale prices of petrol and diesel have risen by around one-fifth over the past month. They are now above government-set retail prices, leading to production cutbacks at refineries, as at power plants when coal and natural gas prices jumped.

Diesel output was down 4.4% in the first nine months of this year compared to the same period a year earlier, although it ticked up in September. Reserve inventories have been run down by about one-fifth. Meanwhile, retail prices have increased by 30% this year. Export supplies are being diverted to the domestic market.

The power and fuel shortages are pushing up producer prices — by a record 10.7% in September — although this has yet to work through to retail prices. Consumer price inflation rose just 0.7% in September.

In part, consumption is being depressed by lockdowns to contain a new wave of Covid-19 outbreaks that have spread to 11 provinces over the past ten days.

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China Lays Out Ambitious Vault To Net-Zero Carbon Economy

Chart showing share of non-fossil fuels in China's energy consumption: actual: 2010-2020, targets: 2025-2060

CHINA’S PATH TO ‘peak carbon’ by 2030 and becoming a net-zero carbon economy by 2060 is dubbed 1+N — one overarching blueprint and n number of implementing policies. On October 24, we got the ‘1’ in the form of a guidance document jointly released by the Party’s Central Committee and the State Council.

All future policy decisions on economic planning, macroeconomic adjustment and industrial policies will have to be compatible with the blueprint, which contains objectives and timelines for broad areas of the economy, including heavy industry, energy, transport, construction and finance.

The headline objective is raising non-fossil fuels share of energy consumption to at least 80% by 2060, a fivefold increase from 2020’s level, with a timeline for non-fossil fuels to hit a 20% share by 2025 and 25% by 2030. Both interim targets have been previously announced, but not the 2060 one.

Even before the current electricity shortages, coal accounted for approaching 60% of energy consumption, so scaling that back will be a dramatic change, and one being undertaken slowly.

Over the past five years, non-fossil fuels have been increasing their share of energy consumption by barely half a percentage point a year. That will need to be accelerated to triple that rate if the goal of creating a ‘green, low-carbon and circular economic system’ is to be met.

That is not only a question of increasing non-fossil fuel energy generation. It also means structural changes to industry and consumption to make the economy less energy-intensive. To have any hope of achieving its goals, Beijing will have to oversee the world’s largest reduction in carbon intensity.

As well as the coal, oil, and gas industries, chemical and petrochemical producers and steel makers can expect close attention from authorities regarding their energy efficiency.

The risks to economic growth inherent in a full-blown green transition are recognised. He Lifeng, head of the National Development and Reform Commission (NDRC), the top economic planning agency, says carbon reduction must be balanced with ensuring the security of industrial output and supply chains and, in what appears to be a nod to recent power outages, disruption to ‘people’s everyday lives’.

A leading group was established under the NDRC in May to guide and coordinate the transition. Yet, much of the implementation will depend on provincial and municipal authorities, and provinces will get some latitude over timing depending on the industrial structures.

However, local officials are on notice that their performance will be judged on their success in meeting their carbon reduction targets. Those who fall short can expect the same criticisms that came the way of officials who failed to meet economic growth targets when they were the benchmark. Officials will, no doubt, get as creative over emissions reductions accounting as they were with growth.

The guidance promises financial carrots as well as administrative sticks. Beijing is considering creating a national fund to promote the transition to a low carbon economy. That would likely support the development of carbon sinks, carbon capture and storage, and other carbon removal mechanisms.

An expansion of the national carbon trading market is all but inevitable. Supportive central banking (e.g., incorporating green credit into macroprudential assessment) and development of the green finance sector are also mentioned in the guidance.

So, too, is the encouragement of private investment in low-carbon industries. Banks and other financial institutions will be guided to provide long-term, low-cost funds for green and low-carbon projects. Policy banks will play a core role in underpinning long-term stable financing to support the green transition, which will not fail for lack of a plan.

This Bystander expects further details to emerge during the COP26 climate summit in Glasgow that starts at the end of this week.

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Power Cuts Highlight China’s Decarbonisation Challenge

Coal fired power plant in Shuozhou, Shanxi province. Photo credit: Kleineolive. Licensed under the Creative Commons Attribution 3.0 Unported license.

REPEATED POWER BLACKOUTS are a sign of misfiring economic management that does not reflect well on governments. Electricity shortages have hit many regions of China over the past month, affecting manufacturing, traffic and street lighting, and homes, often without warning. Sixteen out of 31 provinces have begun rationing electricity, and the northeast faces the prospect of power cuts running through the winter.

The power shortages are the consequence of a combination of contradictory policies: moves to improve energy efficiency and cut consumption in support of carbon reduction goals, and fitful reform of the largely coal-fired power generation sector where long-standing subsidies and price controls cannot withstand the rise in global coal prices, leaving power plants short on fuel.

Provinces’ implementation of obligatory emission-reduction targets imposed on them by central government has been haphazard, varying from draconian to lax. In addition, the 3% reduction target for energy intensity for 2021 has also got ahead of the planning process.

The 14th five-year plan (2021-25) mandates targets for improving energy intensity (energy consumption per unit of GDP) and reducing CO2 emissions per unit of GDP. There is also a binding minimum target for the domestic energy supply from all sources of 4.6 billion tonnes of standard coal equivalent (versus 4.86 billion in 2019), but no caps on carbon emissions and coal consumption, and only an aspirational goal to increase the share of non-fossil-fuels in total energy consumption.

The 14th Five-Year Plan for Energy, likely to be published around or after the COP26 summit in Scotland in November, will provide provincial and municipal governments with a more detailed road map. However, that will cover the years through to 2025 and not show the full path to the 2060 net carbon neutrality target date. However, until they have that road map, Chinese and foreign firms operating in China will delay drawing up the emissions reduction strategies that are likely to be required.

The current energy intensity target has also run headlong into China’s infrastructure-investment pandemic stimulus and export- and industry-driven recovery. Factories have put filling orders now, with the consequent surge in demand for power, ahead of improving their energy efficiency.

Last year, primary energy consumption rose 2.1%, coal consumption 0.6% and carbon emissions 0.3%, whereas energy consumption and emissions declined in almost every other economy. The trends have accelerated into 2021.

Beijing is now having to arrange emergency coal supplies for fuel-short provinces and marshall the distribution grid for inter-provincial power-sharing.

The power situation illustrates the costs Beijing will have to shoulder politically and economically if President Xi Jinping’s decarbonisation goals are to be met, and more generally in structurally changing the economy for the next phase of economic development.

Achieving both will mean slower growth, which will have political as well as economic management dimensions. All but the wealthiest provinces are still industrialising, reliant on energy-intensive infrastructure and industries for growth and jobs, and remain fossil-fuel dependent. Xi has also set a goal of doubling the economy over the next quarter-century, implying 4% annual growth.

Yet even with modest growth rates reducing energy demand, technological advances in energy efficiency and the fledgling national carbon trading market taking wing, it will still require rigorous enforcement of central government policies to change the country’s energy mix to lessen its dependence on fossil fuels. As the efforts to impose energy intensity standards are now showing, provincial and local officials will readily foot drag or worse in implementing Beijing’s policies when it is in their interests to do so.

As with many aspects of rebalancing, the tight networking of local officials and local industries provides inherent resistance to policy direction from the centre. This is exacerbated by many of the major players in energy, including the oil companies, major power generators, the two grid companies and industrial consumers such as steel and cement manufacturers, are state-owned enterprises with size and political influence, especially at the local level.

China is far from alone in having to deal with the conflicting tensions between climate mitigation measures and jobs and economic growth. Beijing has prioritised the former of late, but continuing to do will require sufficient political will at high enough levels of the leadership. That will continue to exist until it does not because the political calculations have changed.

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China Will End Coal-Fired Power Plants Abroad If Not Yet At Home

CHINA WILL STOP funding the construction of overseas coal-fired power stations under the Belt and Road Initiative, President Xi Jinping told the UN General Assembly meeting in New York via a video link.

The decision will be taken as a welcome, if somewhat symbolic, boost to global control of greenhouse gas emissions, with the next round of COP climate discussions due to take place in Scotland in November.

However, Xi was light on details of how the policy change would be implemented; his announcement amounted to a single sentence in his speech. It appears that China has not funded any coal-fired power stations abroad so far this year, although it has accounted for the majority of new coal projects around the world in recent years.

The bigger switch for China, the world’s largest emitter of greenhouse gases, would be to wean itself off its dependency on coal for domestic power generation.

Half the coal burned in the world is burned in China, and in the first half of this year, authorities approved the construction of 24 new coal-fired domestic power plants, according to Greenpeace, although that is a fall of 80% from the same period last year.

Many of these plants will have a lifespan of 40 to 50 years. That will make meeting Xi’s other climate commitments made last year at the UN, including China achieving peak emissions before 2030 and then transitioning to carbon neutrality by 2060, challenging to achieve.

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China’s Polluters Will Have To Pay A Price

A coal-fired power plant in Shuozhou, Shanxi province, China. Licensed under the Creative Commons Attribution 3.0 Unported license. Photo credit: Kleinolive.

CHINA IS NO climate denier, although the connections between climate change and the Henan flooding have been only lightly made in state media. However, reaching peak carbon before 2030 and going carbon neutral by 2060 have been policy since last year and are incorporated into the 14th Five Year Plan (2021-25). 

Specifics are sketchy beyond a 13.5% reduction in energy consumption per unit of GDP, an 18% reduction of carbon dioxide emissions per unit of GDP and an increase in the share of non-fossil-fuel energy in total energy consumption to around 20% from 15.8% over the life of the plan. The country’s new carbon trading market will have to play a significant role if those targets are to be achieved.

The long gestated national market finally launched on July 16 on the Shanghai Environment and Energy Exchange, becoming the world’s largest trading scheme for greenhouse gas emissions from the getgo.

Progress will likely be cautious. For now, only some 2,225 firms in the thermal power generation sector can participate. They emit more than 4 billion tonnes of greenhouse gases a year, contributing about 40% of China’s total carbon dioxide emissions and 15% of the world’s total. 

Other emissions-intensive sectors such, steel, cement and civil aviation are expected to join the market later. 

The initial round of carbon permits was allocated for free. The price per tonne of carbon dioxide equivalent was 48 yuan ($7.42) when the market opened. The first bulk deal — Sinopec’s agreement on July 21 to buy 100,000 tonnes of carbon quota from China Resources Group — was priced at 52.92 yuan per tonne.

By way of comparison, the price in the EU’s emissions trading scheme is around 60 euros ($70.80). 

However, China’s power generation industry is far from being a market-driven world and not well placed to shoulder the added cost of carbon. The lack of market-priced electricity — local and regional governments set prices — means there is no way for power generators to raise prices and induce lower and more efficient energy consumption by consumers. 

In the meantime, the price of coal is no longer regulated, leaving the power generators squeezed. The hope is that this will make them jettison their most outdated and inefficient power generation plants — and turn to renewable sources of energy.

The Shanghai price will inevitably rise as the government expands the number of participants, begins auctioning permits and reducing their supply. At present, there is effectively no cap on carbon credits. It will not be until then that market will significantly affect China’s capacity to meet its goal of net-zero carbon emissions by 2060.

China will probably reach peak carbon sometime this decade, come what may, as the industrial structure of the economy changes, although quite when will depend on a mix of the economic growth rate and the vigour with which authorities pursue policy enforcement of emissions reduction.

If anything, early recovery from the pandemic last year put the country on the back foot in pursuit of its goal. Energy consumption and emissions rose in China in 2020, whereas they declined almost everywhere else.

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Oiling The China-Saudi Arabia Relationship

IN 2017, THERE were reports that a Chinese consortium encompassing PetroChina, Sinopec, state-owned banks and sovereign wealth fund China Investment Corporation (CIC) were in discussions with Saudi Arabia about buying 5% of its state oil company, Saudi Aramco.
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This was talked of as an alternative or possibly a precursor to an initial public offering (IPO) of Saudi Aramco shares. The IPO eventually came in December 2019 when the kingdom listed some 1.5% of Saudi Aramco on the Riyadh stock exchange, raising $25.6 billion.

It was not the blockbuster the Saudis had hoped. Neither, as far as anyone knows, did anything come of any significant stand-alone Chinese investment.

Yet reports that elements of the original Chinese consortium are again in talks to buy a stake in Saudi Aramco are doing the rounds once more as Saudi Arabia prepares to sell another slice of Saudi Aramco to international investors to help finance the kingdom’s economic diversification strategy.

Late last month, during a rare interview on Saudi TV, Crown Prince Mohammed bin Salman said that there were discussions underway with a leading global energy company to acquire a 1% stake. His tease was that the energy company was from ‘a huge country’.

A 1% stake would be worth some $19 billion based on Aramco’s current market valuation.

The rationale for selling to Chinese interests is, in part, the same as in 2017 — to bolster Saudi Aramco’s sales in its largest export market. The crown prince made no bones about that in his interview. He needs to secure oil export markets for the long-term because he is increasingly leaning on Aramco to finance Vision 2030, his faltering plan to transform the Saudi economy away from its hydrocarbons dependency.

China is the biggest buyer of Saudi oil, but Russia has been eating into its lead over the past couple of years. Regardless of the pandemic, Saudi shipments to China in 2020 rose 1.9% from a year earlier to 84.92 million tonnes, or about 1.69 million barrels per day (bpd), according to General Administration of Chinese Customs data.

However, imports from Russia rose by 7.6% to 83.57 million tonnes or 1.67 million bpd. The Saudis had to cut their prices late in the year to hold off Russia from taking the top spot. Russia has the advantage of being able to send its oil through a pipeline over its land border with China; Saudi oil has to be shipped.

Imports from both countries were dwarfed by those from the United States, which more than tripled in 2020 to 19.76 million tonnes, or 394,000 bpd, bolstered by the requirements of Phase One of the US-China trade deal.

However, over the next two decades, output from US and Russian producers is set to drop, leaving a supply gap in China that Saudi Arabia as the low-cost producer, wants to fill.

To ensure that it will still have a market to supply as China heads toward net carbon neutrality by 2060, Saudi Aramco has been co-operating with China’s research to develop low-to-no carbon internal combustion engine technologies for cars and lorries. Its chief transport technologist gave a keynote at the grandly titled Second World Congress on Internal Combustion Engines held in Jinan a couple of weeks ago.

Beijing has designated Saudi Arabia and the United Arab Emirates (UAE) as comprehensive strategic partners. President Xi Jinping made a point of mentioning that when he spoke to the crown prince in mid-April about the geopolitics of climate change ahead of the forthcoming Paris climate agreement meeting later this year.

However, China sees that status mostly in terms of the considerable expansion of its footprint in the Gulf over the past decade with the signature of numerous multi-sectoral cooperation agreements in the region focused on infrastructure and energy. However, it also has to tread lightly among the Gulf Arab states with regards to its relationship with Iran.

For its part, the kingdom sees China as only one source for the inflow of foreign investment for economic diversification, not as a substitute for established partners. Selling Beijing oil helps keep that distinction clean politically.

Critically, the crown prince will need to balance Saudi Arabia’s growing relations with Beijing with not alienating Washington. The United States remains its principal economic partner and is still the main Gulf security guarantor even if the relationship with the United States is less overtly cosy under US President Joe Biden than with his predecessor, Donald Trump.

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A Green Twist To China’s Two Loops

THIS WEEK, CHINA’S top policy-makers will hold their annual plenum. For four days, they will solidify goals for the next Five-Year Plan (2021-25) and set the political guidelines for the country’s economic development to 2035.

The 14th five-year plan will not be formally signed-off until next March, but the plenum will settle the sub-heads under the heads the Politburo has already decided.

It will particularly give structure to the ‘dual circulation’ or ‘dual loops’ notion. This reframes the rebalancing of the economy towards higher-quality, sustainable growth as the pairing of global integration with expanded domestic supply and demand. The latter, ‘inner loop’, will take China a long way down the road of self-sufficiency, especially in high-tech goods and services, with significant import substitution. Beijing would see the ‘external loop’ as being China-led.

Ambitious green policies are likely to be a core driver of both loops, now that China has unilaterally set itself the goal of carbon neutrality by 2060. Beijing had targeted peak emissions in 2030 but had not previously set a deadline for going carbon neutral before President Xi Jinping announced it at the UN General Assembly in September.

The five-year plan is likely to lay out a formidable route map for the transition to a low carbon economy based on either the elimination of CO2 emissions or balancing them with carbon removal. Measures could include a substantial hike in the target share of non-fossil fuels in primary energy consumption by 2025, currently 15%, an annual CO2 emissions cap of under 10.5 billion tonnes (ie, no growth from current levels) and the current decarbonisation regime getting much stricter after 2030.

Xi’s public imprimatur on 2060 carbon neutrality suggests to this Bystander that policy decisions earlier this year that encouraged more coal-fired power plants have little long-term directional intent.

Optimists will regard the new goal as potentially the single most significant contribution yet to mitigating global warming. Realists will note that it would also make it more difficult for the United States to be the only large nation not transitioning to a low-carbon economy, although that could change if Joe Biden replaces Donald Trump as US president; Biden has committed to the United States being carbon neutral by 2050, ten years ahead of China’s target.

China’s planners have already identified green technologies from renewable energy to electric vehicles and recycling as among the critical next-generation industries that the state will champion in the move up the economic value chain. They also see large export markets for Chinese green technology products, especially in countries along the Belt and Road that are increasingly forming China’s economic sphere of interest.

Thus the full weight of China’s industrial planning machine will be thrown behind the 2060 goal. Ministries, provinces, cities, state-owned enterprises and industry bodies will all create new economic plans consistent with delivering it.

One early expression of this could come ahead of next year’s UN climate conference, COP26, particularly if Biden does become US president and takes his country back into the Paris climate agreement. Beijing could lead a movement for international economic coordination of a ‘green’ recovery from the Covid-19 pandemic. The rest of the world will then be faced with dealing with the deft trick of Chinese industrial policy being turned into a global public good.

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