August 19, 2021

Asia

CHINA: Political commitment to reducing carbon emissions appears strong

BY Gabriel Wildau

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( 6 mins)
  • President Xi Jinping unveiled his ambitious 2030 and 2060 climate pledges last year before China’s bureaucracy had developed a policy roadmap for achieving them.
  • But a series of policy announcements in recent weeks suggests the pledges are not empty, and the Communist Party’s political commitment to achieving these goals is strong.
  • An environmental inspection team with a high-level mandate is serving as the tip of the spear on enforcement, after years in which environmental regulators lacked bureaucratic clout.

When Xi unveiled climate goals in September, we noted that achieving them would require extraordinary changes to China’s energy infrastructure, notably a willingness to tackle entrenched coal interests. According to sources, Xi’s pledge that China will reach peak carbon emissions by 2030 and net-zero emissions by 2060 did not arise from the party-state’s standard policymaking process, which produces most long-term blueprints like the 14th Five-Year Plan (5YP). Rather, Xi’s climate pledges appeared to take the bureaucracy largely by surprise, and the targets were not accompanied by a specific roadmap for achieving them.

In recent weeks, however, a series of policy announcements has highlighted the strength of the party’s political commitment to achieving these goals. To be sure, these discrete policies still fall well short of a comprehensive roadmap, and there are still good reasons to doubt whether China will meet the targets. Nevertheless, recent actions suggest the party is serious about achieving Xi’s goals and willing to adopt difficult measures to do so. But given the difficulty of achieving the 2060 target, Xi is unlikely to shift the target date forward to 2050 to match major economies, despite international pressure.

Strengthening regulators

China’s Ministry of Ecology and Environment (MEE) has traditionally been bureaucratically weak, lacking the ability to gain cooperation from other regulatory agencies or enforce its mandates on powerful state-owned enterprises. But the party has recently moved to strengthen the MEE and devote greater political capital to environmental objectives by establishing two new, high-level party organs dedicated to the issue.

The first of these is the Central Ecological and Environmental Inspection Group. Led by the MEE, the group was initially established in 2015 with a mandate from the State Council, China’s cabinet, but the group received a bureaucratic upgrade in 2019 when the party’s Central Committee assumed joint authority. The group now reports to Vice Premier Han Zheng, a member of the elite Politburo Standing Committee whose portfolio includes energy and environment. Other Politburo and Central Committee members also serve in the inspection group’s leadership, reinforcing its political stature.

The function of the inspection group is to restrain local governments and party officials from proceeding with high-pollution projects in defiance of environmental regulations. In January, the team published unprecedentedly blunt criticism of the National Energy Administration (NEA) for “failures” related to energy policy, including insufficient efforts at limiting coal power plants and promoting clean energy. By late July, the inspection team had released reports from its inspections of eight provinces. Many provinces received criticism for exceeding coal and energy targets in the 13th 5YP (2016-2020), with the team also noting that many provinces are on pace to exceed the 14th 5YP’s targets as well.

In the steel sector, which accounts for about 15% of China’s total emissions, the inspection group examined whether provinces were complying with a directive in April from the National Development and Reform Commission (NDRC), China’s state planner, and the Ministry of Industry and Information Technology, which regulates the steel sector, ordering provinces to ensure a year-on-year decline in total production this year. Since then, 19 provinces have reportedly imposed mandatory steel production cuts. In a sign of political will, these announcements occurred despite the alarming spike in steel prices that occurred in April after Tangshan city, China’s biggest steelmaking region, announced production cuts. Steel output fell in both June and July on a month-on-month basis, with July output reaching the lowest monthly level since April 2020. Policymakers are pairing production cuts with measures to cool the frothy housing market, which can reduce construction-related steel demand and alleviate upward price pressure.

The second new party organ is the Peak Carbon and Carbon Neutrality Work Leadership Small Group. Also led by Han, the small group held its first plenary meeting in June. Since assuming party leadership in 2012, Xi has created “leadership small groups” dedicated to various issues. Much like the inspection group, the purpose of the leadership group is to cut through bureaucratic resistance to deal with urgent issues that require coordination between ministries. The small group includes essentially all senior officials with a role in regulating climate and energy issues, including Liu He, the Politburo member, vice premier in charge of economic policy, and trusted Xi advisor. The NDRC, which is powerful but has also traditionally resistant to environmental regulation, is operating the group’s administrative office, which may serve to shift the agency’s bureaucratic incentives.

Canceled projects

A series of recent cancellations or suspensions of large industrial projects testifies to the leadership’s willingness to endure economic pain in service of climate goals. In July, Yulin city in Shaanxi province – the heart of China’s coal country – suspended a coal-to-chemical project with planned investment of RMB 126bn (USD 19bn) that would have generated an estimated 50,000 new jobs. The cancellation followed a visit to the project site in May by Shaanxi provincial and some national party leaders, after which the provincial vice governor instructed officials to restrain “blind development” of “dual high” projects. “Dual high” has become a key policy concept guiding project approvals: projects with both high energy use and high emissions must now submit to energy saving reviews by NDRC before proceeding. Local media reported that in Shaanxi alone, seven projects have been suspended on this basis.

The Yulin suspensions are not an isolated case. In June, the Guangdong provincial branch of the NEA rescinded approval for Sinopec’s plan to build a RMB 29bn ethylene production line in Maoming city, after initially approving the project in April. The official announcement was vague, citing “noncompliance with national industrial policy,” but the cancellation was reportedly a response to the new MEE requirement for energy saving reviews.

As noted above, the MEE-led inspection team has criticized provincial leaders for exceeding energy targets. In Shanxi province, the team identified 178 high-energy projects planned for the 14th 5YP that, if completed, would result in a massive overshoot of the plan’s pollution targets. Provincial leaders have 30 working days from the publication of the inspection team’s report to develop “rectification” plans. These plans are likely to include further cancellations.

The NDRC signaled the likelihood of further cancellations on 17 August when it published a report naming and shaming 19 provinces for failing to meet energy targets for the first half of 2021. The agency further announced that it would temporarily stop conducting the required energy savings reviews for all “dual high” projects in these provinces, except for projects included in national- level plans. With these reviews suspended, hundreds of projects will be unable to proceed, at least temporarily.

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