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By accelerating its clean energy transition, China can secure major economic, innovation, and employment benefits while helping the world move nearer to achieving shared climate goals
China’s remarkable economic growth over the past four decades has lifted hundreds of millions of people out of poverty, turning the country into a leader in many industries but also the world’s largest carbon emitter, accounting for one-third of global carbon dioxide (CO2) emissions. China provides more than half of the world’s steel and cement, but the CO2 emissions from just those two sectors in China are higher than the European Union’s total CO2 emissions.
China is aiming to reach a peak in its CO2 emissions before 2030 and carbon neutrality before 2060. The energy sector is the source of almost 90% of China’s greenhouse gas emissions, putting energy policies at the heart of the country’s transition to carbon neutrality. A new report released titled ‘An Energy Sector Roadmap to Carbon Neutrality in China’ explores how China can reach its objectives while ensuring energy security and affordability for its citizens. It shows that the required investments are well within China’s capacities, given the size and dynamism of its economy.
“China is a clean energy powerhouse and has played a leading role in many of the world’s success stories to date, from solar power to electric vehicles,” said Fatih Birol, Executive Director. “China’s efforts to achieve its ambition of carbon neutrality will result in even greater flourishing across a wider array of low-carbon technologies and a significant decline in fossil fuel use in the coming decades.”
“However, the really uplifting news is that our new Roadmap shows China has the means and capabilities to accomplish an even faster clean energy transition that would result in greater social and economic benefits for the Chinese people and also increase the world’s chances of limiting the rise in global temperatures to 1.5 °C,” Dr. Birol added. “This accelerated transition would put China’s CO2 emissions into marked decline after 2025, opening up the possibility of China reaching carbon neutrality well before 2060. This would be both good for China and good for the world.”
China has made notable progress in its clean energy transition, but it still faces some significant challenges. At the same time, China has added more solar power capacity than any other country year after year.
At the same time, reaching China’s climate targets cannot rely solely on the rollout of renewables and electric vehicles. If the existing emissions-intensive energy infrastructure in China continues to operate in the same way as it does today, its CO2 output between now and 2060 would amount to one-third of the global carbon budget for limiting the global temperature rise to 1.5 °C. This is aside from any new plants that may be built to meet growing demand.
The China Roadmap sets out a pathway consistent with the enhanced ambitions that China announced last year in which CO2 emissions reach a peak before 2030 and carbon neutrality is achieved before 2060. The main drivers of emissions reductions between now and 2030 in this pathway are energy efficiency improvements, expansion of renewables, and a reduction in coal use. Electricity generation from renewables, mainly wind and solar PV, increases seven-fold between 2020 and 2060, accounting for almost 80% of China’s power mix by then. Industrial CO2 emissions decline by nearly 95% by 2060, with the role of emerging innovative technologies, such as hydrogen and carbon capture, growing strongly after 2030. These changes will boost China’s labor market, with more new jobs created in growing low-carbon energy technologies than are lost in declining fossil fuel industries.
The Roadmap also explores the opportunities for China to pursue – and benefit from – an even faster clean energy transition, which would result in China’s CO2 emissions declining to almost 20% below their current level by 2030. On top of the major advantages that come from reducing the impact of climate change, the social and economic benefits include greater prosperity for regions that have not yet fully benefited from China’s economic development and a bigger net gain in job creation nationwide. And investment needs are not a barrier to the faster transition, since the cumulative investments are similar to those in the slower ones.
“This Roadmap shows what is possible, China has a clear pathway to build a more sustainable, secure, and inclusive energy future,” Dr. Birol said. “As China makes some important decisions in the coming weeks and months, the IEA is pleased to share our analysis and global expertise with Chinese policymakers so that together we can help build a brighter future. I also welcome President Xi Jinping’s announcement last week that China will stop building coal power plants overseas as a further positive step towards curbing global emissions.”
In September 2020, President Xi Jinping announced that the People’s Republic of China will “aim to have CO2 emissions peak before 2030 and achieve carbon neutrality before 2060”. Amid the growing wave of governments around the world setting targets for reaching net-zero emissions, no pledge is as significant as China’s. The country is the world’s largest energy consumer and carbon emitter, accounting for one-third of global CO2 emissions. The pace of China’s emissions reductions will be an important factor in global efforts to limit global warming to 1.5 °C.
This report, An Energy Sector Roadmap to Carbon Neutrality in China, responds to the Chinese government’s invitation to the IEA to co-operate on long-term strategies by setting out pathways for reaching carbon neutrality in China’s energy sector. It shows that achieving carbon neutrality fits with China’s broader development goals, such as increasing prosperity and shifting towards innovation-driven growth. The first pathway in this Roadmap – the Announced Pledges Scenario – reflects the enhanced targets China announced in 2020. The report also explores the implications of a faster transition – the Accelerated Transition Scenario – and the socio-economic benefits it would bring beyond those associated with reducing the impact of climate change.
This Roadmap examines the technology challenges and opportunities that this new phase of the clean energy transition will bring for China’s development, with a focus on long-term needs. The technology innovations required in the Chinese context are a key in-depth focus area. The report concludes with a series of policy considerations to inform China’s energy debate.
In September 2020, President Xi Jinping announced that China will “aim to have CO2 emissions peak before 2030 and achieve carbon neutrality before 2060”. Announced 40 years after the country began its remarkable journey towards economic modernization, this new vision for China’s future comes amid growing convergence among the world’s major economies on the need to reach net-zero emissions globally by mid-century. But no pledge is as significant as China’s: the country is the world’s largest energy consumer and carbon emitter, accounting for one-third of global CO2 emissions. The pace of China’s emissions reductions over the coming decades will be important in determining whether the world succeeds in preventing global warming from exceeding 1.5 °C.
This Roadmap responds to the Chinese government’s invitation to the IEA to co-operate on long-term strategies by setting out pathways for reaching carbon neutrality in China’s energy sector. It also shows that achieving carbon neutrality fits with China’s broader development goals, such as increasing prosperity, strengthening technology leadership, and shifting towards innovation-driven growth. The first pathway in this Roadmap – the Announced Pledges Scenario (APS) – reflects China’s enhanced targets that it declared in 2020 in which emissions of CO2 reach a peak before 2030 and net-zero by 2060. The Roadmap also explores the opportunities for an even faster transition and the socio-economic benefits it would bring to China beyond those associated with reducing the impact of climate change: the Accelerated Transition Scenario (ATS).
Energy consumption has doubled since 2005, but the energy intensity of gross domestic product (GDP) has decreased significantly in the same period. Coal accounts for over 60% of power generation – and new coal power plants continue to be built – but solar photovoltaics (PV) capacity additions have outpaced those of any other country. China is the second-largest oil consumer in the world, but also home to 70% of global manufacturing capacity for electric vehicle batteries, with Jiangsu province alone accounting for one-third of the country’s capacity. China’s contributions to low-carbon technologies, particularly solar PV, were mostly driven by the government’s increasingly ambitious five-year plans, leading to cost reductions that have changed the way the world thinks about the future of clean energy. If the world is to meet its climate goals, then similar clean energy progress is needed – but on a greater scale and in all sectors.
The sooner the emissions peak comes, the higher China’s chance of reaching carbon neutrality on time. The leading sources of China’s emissions are the power sector (48% of CO2 emissions from energy and industrial processes), industry (36%), transport (8%), and buildings (5%). The specific targets made public so far from the latest Five-Year Plan include an 18% reduction in CO2 intensity and a 13.5% reduction in energy intensity during the period 2021-2025. There is also a non-binding proposal to raise the non-fossil fuel share of total energy consumption to 20% by 2025 (from around 16% in 2020). If China achieves these short-term policy targets, the projects that China’s CO2 emissions from fuel combustion will be on track to plateau in the mid-2020s and then enter a modest decline to 2030. We also note China’s commitment at the United Nations General Assembly in September 2021 to discontinue building coal-fired power projects abroad and to step up support for clean energy.
In the APS, China’s primary energy demand grows much more slowly through 2030 than the overall economy. This is mainly the result of efficiency gains and a shift away from heavy industry. A transforming energy sector leads to rapid improvements in air quality. Solar becomes the largest primary energy source by around 2045. By 2060, almost one-fifth of electricity is used to generate hydrogen.
Energy sector investment climbs significantly in absolute terms but falls as a share of overall economic activity. Total annual investment reaches USD 640 billion (around CNY 4 trillion) in 2030 – and nearly USD 900 billion (CNY 6 trillion) in 2060, almost a 60% increase relative to recent years. Annual energy investment’s share of GDP, which averaged 2.5% in 2016-2020, drops to just 1.1% by 2060.
China’s power sector achieves net-zero CO2 emissions before 2055 in the APS. Renewables-based generation, mainly wind and solar PV, increases seven-fold between 2020 and 2060, accounting for almost 80% of generation by then. By contrast, the share of coal drops from over 60% to just 5%, and unabated coal-based generation stops in 2050. Renewable capacity rises at least three-fold in all regions by 2060, with the largest growth in China’s Northwest and Northern regions where solar and onshore wind take advantage of strong resource potential and good availability of land. However, investments in low-carbon flexibility sources to increase the reliability and resilience of electricity systems are highest in China’s coastal provinces.
In the APS, industrial CO2 emissions decline by nearly 95% and unabated coal use by around 90% by 2060, with the residual emissions being offset by negative emissions in the power and fuel transformation sectors. Energy efficiency improvements and electrification drive most of the industrial emissions reductions in the short term while emerging innovative technologies, such as hydrogen and carbon capture, utilization, and storage (CCUS), take over post-2030.
Electrification is the key to decarbonizing transport and buildings. New investments in metro, light-rail and electric buses in cities, and high-speed rail between cities, lower the energy intensity of passenger trips. Emissions reductions in road freight, shipping, and aviation come from fuel efficiency gains and the use of low-carbon fuels. Direct CO2 emissions in the buildings sector drop by more than 95% by 2060 through electrification, clean district heating, and energy efficiency.
The timing and level of the peak in emissions, as well as the pace of emissions reductions once the peak has been reached, are crucial for the achievement of China’s longer-term goal of carbon neutrality. China has the technical capabilities, economic means, and policy experience to accomplish a faster clean energy transition to 2030 than in the APS. Its recently launched emissions trading scheme and its power market reforms are two clear examples. In the ATS, policy progress accelerates, resulting in a faster decline in coal use in power and industry, stronger deployment of existing low-carbon technologies, and more rapid efficiency gains. In 2030, energy sector CO2 emissions are more than 2 Gt, or nearly 20%, lower in the ATS than their level today. Investment needs are not a major barrier: cumulative investments in the ATS are similar to those in the APS.
They include bringing greater prosperity to regions that have not yet fully benefited from China’s economic development, its central role in global clean energy technology value chains, and its emerging leadership in clean energy innovation. Accelerated domestic action increases employment in China’s clean energy supply by 3.6 million by 2030, compared with the 2.3 million jobs lost in fossil fuel supply and fossil fuel power plants. Net additional jobs in this faster transition are almost 1 million higher than in the announced pledges pathway. Employment could grow even more if China captures some of the rising demand for clean energy technologies driven by other countries’ greater ambition.
Such an ambition could require the energy sector to reach net-zero CO2 emissions well before 2060 to compensate for the non-energy sector emissions that are more difficult to eliminate. This would make accelerated progress in reducing CO2 emissions through to 2030 essential. The longer-term transition challenge would be profound: for example, reaching net-zero CO2 emissions as soon as 2050 would imply that the installed capacity of solar PV and wind would be around 1 400 GW, or 20%, higher than it is in the APS in 2050.
If the existing emissions-intensive infrastructure in China today continues to operate in the same way it has in recent years, it could result in 175 Gt of CO2 emissions between now and 2060. This is the equivalent of one-third of the remaining global emissions budget that could limit the global temperature rise to 1.5 °C.
In the APS, about 40% of the Chinese energy sector’s CO2 emissions reductions in 2060 come from technologies that are still at the prototype or demonstration stage today. It is essential to have new and emerging low-carbon industrial technologies available at the time of the planned phase-out of existing capacity so as to avoid the need for a further cycle of emissions-intensive capacity renewal. This alone could avoid emissions from heavy industry in China equivalent to almost 15% of the remaining estimated global carbon budget that is compatible with a 50% chance of limiting the average temperature increase to 1.5 °C.
The ATS avoids around 20 Gt of “locked-in” emissions to 2060 from long-lived assets in the power and industry sectors that are built in the period to 2030 in the APS. This early action means that the required average annual pace of emissions reductions to reach carbon neutrality by 2060 is nearly 20% lower over 2030-2060 than in the APS, leaving more time for markets to adjust and businesses and consumers to adapt.
China is emerging as a world leader in clean energy innovation: public spending on low-carbon energy research and development (R&D) in China has risen by 70% since 2015. China accounts for nearly 10% of patenting activity in renewables and EVs. In recent years, its start-ups have attracted more than one-third of global early-stage energy venture capital.
The latest Five-Year Plan aims to shift the focus of innovation to low-carbon technologies and pursue new policy approaches. Current Chinese policy incentives are better suited to large-scale technologies like CCUS and biorefining than network infrastructure and consumer-facing products, which are China’s current manufacturing strengths. Beyond direct R&D funding, policies can incentivize innovators through competitive niche markets, infrastructure investments, and other regulatory measures to stimulate technology deployment.
China’s many strengths make it well-placed to successfully carry out its own transition to carbon neutrality while also demonstrating international leadership in technology and energy policymaking. China is both the world’s largest emitter and the largest manufacturer of key clean energy technologies such as solar panels and EV batteries. What happens in China will go a long way towards shaping the outcome of global efforts to reduce emissions in time to prevent the worst effects of climate change. For those efforts to succeed, international collaboration with China is essential.