What do China’s new green targets really mean?

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It’s safe to assume that China’s latest five-year plan was drawn up well before the current conflict in the Middle East sent oil prices soaring. But the crisis has underscored the dangers of heavy reliance on foreign fossil fuels, not least for China, the world’s biggest oil and gas importer.

This has been a key motivation behind the country’s clean energy push. And that drive remains a priority for Beijing, judging by its latest strategic blueprint — even as it takes care to keep its options open.

ENERGY POLICY

Unpacking China’s new five-year plan

Deng Xiaoping, the leader who ushered in China’s modern economic boom, liked to speak of “crossing the river by feeling for the stones”. His successors are channelling that cautious spirit as they plan for the next phase of the country’s green energy shift.

China’s new five-year plan, which was unveiled last Thursday and is set to be approved by the national legislature this week, disappointed some observers with climate targets that were strikingly modest in ambition.

Beijing is committing to reduce carbon intensity (the amount of CO₂ emitted per unit of GDP) by 17 per cent by 2030 — a smaller decline than the target that was set, and missed, in its last five-year plan. It trod similarly gently in its language around coal, the country’s biggest source of carbon emissions, with no hard commitment to a fall in consumption during the next five years.

Is Beijing’s green policy push veering off the rails? That would be a hasty conclusion to draw.

For one thing, this agenda is bound up with Xi Jinping’s personal brand. Xi began promoting his “ecological civilisation” vision at the start of his leadership in 2012, in part to address public unhappiness at urban pollution. It took on growing economic significance as China achieved global dominance across large swaths of the clean energy sector. Xi went on to have the term written into the national constitution.

Last week’s text is suffused with mentions of “ecological civilisation” alongside other Xi-era buzz phrases like “green development”, which continue to be trumpeted in government media.

“Positioning green development as ‘the defining feature of Chinese modernisation’ is not merely a slogan for China, but represents a strategic choice based on national realities and long-term vision,” the state news agency wrote this week in a report on the five-year plan.

Last September, Xi announced that China would cut its emissions by 7-10 per cent from peak levels by 2035 — the first time Beijing has made a pledge on absolute emission cuts. The new plan sets out the key policy levers China will put in place to pursue this goal, including an expansion of the national carbon market and tighter standards around industrial emissions.

What it doesn’t do is commit to a fall in emissions over the next five years. China has promised its emissions will peak by the end of this decade, and that the “carbon intensity” of its economy will decline by 17 per cent between now and then. In theory, that leaves open the possibility of a significant rise in total emissions before 2030, if the economic growth rate stays strong.

But recent official data suggests that the peak might already have been passed. Chinese total emissions from energy and industry edged down by 0.3 per cent last year, despite a 3.5 per cent rise in total energy consumption.

The country’s dramatic solar and wind growth has now reached a scale where it is eating away at coal generation — which is still by far China’s biggest source of power, but declined last year for only the second time since 1976.

It’s a similar story in electric vehicles — central to Beijing’s efforts to reduce dependence on imported oil, which it has long seen as a key strategic vulnerability. Last year sales of fully electric and plug-in hybrid vehicles reached 54 per cent of the Chinese car market. The International Energy Agency predicts that China’s oil demand will be in decline from 2028 onwards.

The new plan contains various measures to keep this momentum going. There will be a push of offshore wind, solar-plant construction in desert areas and relocation of industry to areas rich in renewable energy, among the many priorities listed.

Unlike previous five-year plans, it lacks big headline targets for clean energy growth. That’s because these are no longer needed, argues Li Shuo, director of the China Climate Hub at the Asia Society Policy Institute. “These industries have already matured, they’ve established themselves,” he says. “It’s like a snowball rolling.”

So why the foot-dragging on coal? Back in 2021, Xi told an international climate summit that China would “phase down” the use of coal during the 2026-2030 five-year plan period. It turns out there’s no such commitment in the plan itself, which talks much more vaguely about “coal control and reduction efforts”.

One part of the explanation here relates to another oft-quoted Xi aphorism, which can be roughly translated as “build before breaking”. In other words, China wants to hang on to its huge coal sector as a safety net while it builds out a cleaner, lower-cost electricity system around renewables and battery storage.

While China has continued to add coal plants to its grid, their utilisation rates have been gradually falling, to just 48 per cent of capacity last year, according to Wood Mackenzie. You could see the coal plants as a set of “training wheels” while China’s renewable sector finds its balance, suggests Yuan Jiahai, of North China Electric Power University.

In short, this looks like Beijing maintaining room to manoeuvre rather than backsliding on its decarbonisation strategy. After the US government’s abandonment of climate efforts, there’s less international pressure on China to constrain itself with specific targets.

At the same time, the incentives are stronger than ever for Xi’s administration to double down on its clean energy drive. The ongoing chaos in the Middle East has highlighted the risks of dependence on oil and gas imports. Donald Trump’s repudiation of the Paris Agreement has given Beijing a clear opportunity to strengthen its international influence by “lead[ing] global climate governance”, as the new five-year plan puts it.

And the more rapidly the rest of the world moves towards clean energy, the more China stands to benefit. The country’s huge low-carbon energy sector drove more than a third of the country’s economic growth last year, according to a study by the Centre for Research on Energy and Clean Air.

“What’s driving China’s decarbonisation at this juncture is less environmental considerations than the desire to develop the economy and upgrade the manufacturing industry,” says Li. “More emissions reduction means more GDP growth. That’s almost a dream scenario for any country.”

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Financial Times