China Chat 05 – Cutting Carbon in China: Who, What, When (Video)
Caixin is here to help you understand China from the inside. In this webinar, Caixin chats with two of China's climate policy insiders. You will hear them explain the motivation and reality of China's net-zero pledge.
Last year, China surprised many in the international community with its pledge to reach emission peak by 2030 and carbon neutrality by 2060. Why did China make the pledge? What are the bottlenecks? What has been happening on the ground with local governments? Who are the policymaker? Read the recap below.
Chief Representative, Environmental Defense Fund’s China Program
Dr. Zhang has been involved in establishing China’s Carbon Trading System since 2013. He helped found the China program of Environmental Defense Fund (EDF), a leading US environmental NGO, since 1999. Dr. Zhang serves on many advisory boards, including Chinese Research Academy of Environmental Sciences (CRAES) and is a special advisor for China Council for International Cooperation on Environment and Development (CCICED).
CEO and Chairman, Asia Green Fund
A leading commentor in ESG and impact investment in China, Dr. Bai runs Asia Green Fund, a green impact private equity firm with around RMB 15 billion Assets Under Management. He is also the Chairman of East Low Carbon, and a director of Capital Heating, Four Rivers, Huitongda, Low Carbon Environment, Hosjoy, and AiPark. Dr. Bai holds a Ph.D. in Physics from MIT.
Moderated by June Deng, Research Analyst, Caixin Insight
A Quick Recap
China used to firmly prioritize economic development. Why did China's attitude change?
The 2030/2060 announcement should be understood from three perspectives: environmental, economic and diplomatic, Bai Bo believes. First, environment sustainability is a critical component for improving the Chinese people’s quality of life, which is promised as a deliverable by the government. Second, it is a driver for transition towards high-quality economic growth (e.g. through new investment and the adoption of new technology). Third, it is a way through which China takes on more responsibility in the world.
Who are the policymakers?
Currently, three ministerial-level departments take leading roles, Zhang Jianyu explains. Ministry of Ecology and Environment (MEE) is the main agency responsible for issuing policies related to climate change and the carbon goals, including setting up and managing the highly anticipated national carbon emission trading market. While National Development and Reform Commission (NDRC) is in charge of drafting policies on a macro level, it also focuses on resource conservation and energy-saving issues. The central bank leads green finance-related work.
A new higher-level body, China’s first leading group designated for carbon peaking and neutrality, could bring out new responsibility and division of labour, Zhang Jianyu notes. Unveiled on May 27 in a meeting presided by Vice Premier Han Zheng, the group will play a critical role in inter-ministerial coordination.
How are the local governments handling this new policy priority?
After President Xi’s pledge at the UN, there was a brief period of misunderstanding, Bai Bo acknowledges. Some local officials thought it meant emitting as much as possible before peaking in 2030. But it quickly became apparent to them that this is not the case. Instead, local governments now aims to cut emission immediately and seeks to peak as early as possible to earn political goodwill from the center, Bai Bo believes.
The Central Economic Work Conference on Dec 18, 2020, made it clear for all ministries and local governments, Zhang Jianyu adds. The meeting readout listed the carbon goals as one of the eight tasks for 2021. Another wake-up call happened in February 2020, when the National Energy Administration (NEA), which oversees the country’s energy-related industries, was slammed for neglecting the environment. Now, even grassroot government bodies – jiedao (街道), which oversees a few blocks of a neighborhood, are integrating the carbon goals in their regular activities, Zhang Jianyu believes.
What are the bottlenecks?
First, there needs to be more discussion about the division of labor among the different ministries, Zhang Jianyu admits. Second, considering the economic significance of the manufacturing sectors, many enterprises are yet to find the right balance between economic responsibilities for their shareholders, and their environmental responsibility for the greater society. Third, China needs to improve public awareness of the environmental issues, Zhang Jianyu argues.
A clear KPI is needed to generate incentives, Bai Bo adds. While the 14th 5-Year Plan didn’t include a lot of details, they are gradually being released. Additionally, the private sector needs to be better incentivized to participate. The likely reboot of the China Certified Emission Reduction (CCER) market could potentially raise capital for the likes of solar, electric vehicle and energy efficiency projects. China should also attract international capital through better supporting and incentive structures.
What kind of policy tools should we expect?
Carbon emission is different to other pollutant that relied on end-of-pipe solutions, so this is going much deeper into the fundamentals of the economy, Zhang Jianyu says. One of policy tools unique to China are inspections, like the Central Ecological and Environmental Protection Inspection Group. Carbon policies could become a criteria for national inspections tours to ensure that all-levels of government are accountable for delivering the goals. But it is absolutely necessary have policies that encourage private sector investment, since state assets is never going to be adequate. The national carbon market would be a very important policy tool, if it manages to establish a good carbon pricing system.
For Dr. Zhang’s and Dr. Bai’s accounts of what is happening in state-own enterprises at and the private sector, jump to the video at the 45 min mark.
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