Market Insight by Daryl Liew - China’s 30-60 Carbon Goal

President Xi Jinping surprised the world last September when he declared China was committed to achieving peak carbon emissions by 2030 and being carbon neutral by 2060. This is a significant step forward in the global climate change initiative as China is the world’s largest emitter of carbon, accounting for 20% of annual global emissions.

While the 2030 peak carbon goal is challenging but achievable, the 2060 carbon neutral objective looks like a gargantuan ask. The reason for this is that China’s carbon peak will likely plateau far higher than other regions – almost double that of the US and two and a half times that of Europe. Cutting carbon emissions from such a height will not only require significant investments into green energy, but also entail making drastic changes to the economic model that has brought China so much success.

Transitioning away from coal

A key strategy is to change China’s energy mix, transitioning away from dirty fossil fuels like coal and increasing the use of cleaner sources like wind, solar, hydroelectric and nuclear. Coal, one of the cheapest fossil fuels, is still the main feedstock used in energy generation in China, though its domination has fallen from almost 80% of electricity generation a decade ago to around 60% today, with non-fossil sources now making up 10%. The International Energy Agency estimates that China burns around 3.9bn metric tons of coal a year, more than four times the next biggest coal consumer. 

China obviously needs to do more, and in April, President Xi committed that China’s coal consumption would peak by 2025 and fall thereafter. Critics, however, point to the fact that despite this pledge, China continues to build new coal power stations. While it could be argued that the newer coal power plants are more efficient and emit less carbon per unit of energy generated, it is also a sign that it is difficult for China to completely wean itself off coal.