China’s Policy Blitz Shows Fresh Resolve to Support Clean Energy

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(Bloomberg) — A spate of policy announcements highlights China’s rising confidence in accelerating climate action, as fears over energy security wane and the government steps up support for struggling green industries. 

In the space of less than a week, China has overturned years of reticence to begin setting hard targets for carbon emissions, announced ambitious goals for provincial renewable energy consumption, and established a multi-year plan to strengthen its electricity grid. Its top planning agency has also laid out measures to beef up how industries measure their carbon footprints.

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Taken together, the moves signal a change in priorities taking place in Beijing. Concerns over the state’s ability to guarantee an uninterrupted power supply, which has driven the nation’s reliance on dirty coal, have started to recede. China’s rapid adoption of renewables means clean energy is already meeting most additional power demand, and beginning to trim the nation’s world-leading appetite for fossil fuels. With clean tech manufacturing now viewed as a critical driver of economic growth, the climate is set to be a key beneficiary.

“It’s a significant shift in attitude that climate and the economy are not seen as mutually exclusive anymore,” said Cosimo Ries, an analyst at consulting firm Trivium China. “The government is now confident that you can drive economic growth with green industry and help the climate at the same time.”

That shift is already paying dividends on the ground. Emissions in the world’s top polluter fell 1% in the second quarter, the first quarterly drop since the end of the pandemic, Lauri Myllyvirta, senior fellow at the Asia Society Policy Institute, said in a report for Carbon Brief. China’s carbon output could be on track to begin a structural decline this year, so long as renewables installations continue apace and growth in power demand cools, he said.

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That means Beijing may have already succeeded in peaking emissions, more than half a decade in advance of its 2030 target.  

Carbon Targets

Perhaps the most important long-term policy change is the adjustment in emissions targets, from how they compare with economic growth to total levels.

For years, China’s primary climate metric was energy use or emissions per unit of gross domestic product. That approach allowed the government to tout environmental successes by reducing the carbon intensity of its economy, even as total emissions soared. 

The new system announced earlier this month establishes overall emissions as an official measurement starting in 2026, although at first it’ll remain secondary to intensity targets. After 2030, the total volume will become the main target, and intensity will be de-prioritized.

Of course, the effectiveness of the policy switch will depend on how aggressive the government is with its targets. But it’s clearly a move in the right direction for battling climate change.

“It’s a positive signal for the transformation of China’s energy system,” said Yuhe Gao, a senior campaigner with Greenpeace East Asia in Beijing. 

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Regional Goals

Last year, China broke records in adding new wind turbines and solar panels. This year, it’s set on making sure people use them. 

Beijing tells regional governments every year to ensure that a certain percentage of power comes from renewable sources. Those goals have typically grown by increments of 1 to 2 percentage points. But this year’s targets have jumped by a nationwide average of 4 points, according to Daiwa Capital Markets.

In some areas, such as the windy northern enclave of Heilongjiang or the sunny island of Hainan, the requirements have risen by more than 7 percentage points.

They’re aggressive targets and in some cases could be unattainable, said Daiwa analyst Dennis Ip. 

That in itself could signal a shift in the government’s attitude. In climate circles, China has a reputation for setting easily attainable goals and then over-performing. Beijing may now be more willing to risk failure in the pursuit of a bigger payoff. 

Grid Upgrades

Increasing the amount of electricity generated only when the sun shines or wind blows has caused headaches for China’s power networks, which were designed around coal-fired plants that can be switched on and off as needed. 

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“The key barrier for China’s power system today is it’s not flexible enough to support renewable energy,” said Greenpeace’s Gao.

The government’s solution is to transform the grid. It aims to raise the proportion of clean energy carried on long-distance power lines, cut emissions from the coal plants needed to back up renewables, use the nation’s growing fleet of electric vehicles for energy storage in times of need, and set up groups of customers that can quickly reduce demand when shortages are forecast.

Utilities are already busy trying to upgrade their systems. State Grid Corp. of China, which covers more than 80% of the country, will increase spending to a record 600 billion yuan ($84 billion) this year, while China Southern Power Grid Co. plans to lift capital expenditure by more than half by 2027. 

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