China Energy Transition Policies 2020

Summary of China’s Important Energy and Climate Policies and Developments  

President Xi Jinping’s announcement of peaking carbon dioxide emissions before 2030 and achieving carbon neutrality by 2060, the end of the 13th Five Year Plan period and preparations for drafting the 14th Five Year Plan, and the coronavirus pandemic made 2020 a particularly important year for China’s energy sector.

This review of China’s most important energy transition related policies, examines the country’s achievements and trends in developing its energy sector in 2020. Although the review cannot exhaustively cover all issued energy-related policies, it selects and analyzes a wide breadth of important policies in China’s energy sector.


Energy Transition

National Policies, Legislation, Strategy

On 22 September 2020 at the United Nations General Assembly, Chinese President Xi Jinping announced that China’s ambition to achieve carbon neutrality by 2060 and reach its emission peak before 2030. With the 14th Five-Year Plan currently under discussion, the big question is how this announcement will affect the Five-Year Plan for Energy. 2020 marks the last year for the 13th Five-Year Plan (FYP) and the base year for the 14th FYP (2021-2025). The overarching economic and social plan is to be finalized and approved in early 2021, followed by more detailed sectoral targets over the course of 2021.

NEA issues draft of the Energy Law for public comments

In April, the NEA released a draft of the Energy Law of the People’s Republic of China for public comments. The draft provides an overall legal framework for the development of China’s energy sector and covers energy strategy and planning, energy development, fossil and non-fossil energy sources, energy supply and utilization, markets and energy security, supervision, science, and international cooperation. The draft attaches priority to the development of renewable energy, stating that China “lists renewable energy as a priority area for energy development, [and shall] formulate a national long-term target for renewable energy development and utilization.” Furthermore, the importance of the Renewable Obligation System is reemphasized. The draft further emphasizes the necessity to establish open and competitive energy markets and promote a pricing mechanism based on “energy resources, market supply and demand, environmental costs, inter-generational equity, and sustainability.” Regarding fossil fuels, the government shall “strengthen the exploration of fossil energy sources such as coal, oil and natural gas, and implement rational development of fossil energy sources […, and] promote the clean and efficient use of coal […].” The draft is the NEA’s third attempt on releasing an overarching Energy Law, while previous consultative drafts failed to pass consultation in 2007 and 2017. Previous drafts had been criticized for being too technical and not fully reflecting the countries’ overall Energy Revolution strategy and its Reform and Opening policies. Some policy experts criticized the new draft for failing to deliver on important technological developments such as big data, data transparency and data utilization, and remaining too vague on the future of fossil fuels. Experts attribute the latter to the NEA’s lack of authority over several crosscutting policy fields related to fossil fuels, such as mining concessions (Ministry of Natural Resources) and SOE supervision (State-owned Assets Supervision and Administration Commission). Foreign entities welcomed the drafts statement to “protect the lawful rights of foreign […] organizations engaged in energy development and utilization […] within China […]”, replacing an article in older drafts that only stated the restrictions applying to foreign companies.

NDRC draft coal law focuses on rationalizing production and use, omitting mention of climate

On 30 July 2020, NDRC released a draft for comments for the Coal Law of the People’s Republic of China. The draft states that its main purpose is to ensure rational development, utilization and protection of coal resources; to standardize coal production, operation, and related activities; and to promote the development of the coal industry. The revised coal law discusses various aspects of development in the coal sector in China, particularly efforts to improve the coal industry structure by raising production capacity and eliminating low-quality, smaller mines. The draft mentions the need to improve coal market trading to ensure prices are set by market forces. The draft also prioritizes the development of coalbed methane, and “green exploration technology” which includes water preserving mining and landfill mining. However, the law remains vague in terms of environmental sustainability. It makes no mention of climate change or greenhouse gases, or of alternative energy sources such as biomass and hydro-gen that would help reduce the dependence on coal. The draft mentions “clean coal” five times even though it does not provide a definition for what counts as “clean”. It does not discuss any plan or objectives for reducing coal use or coal emissions consistent with addressing global climate change under the Paris Climate Agreement, either. The draft prioritizes state control of coal resources and reiterates government support for mining companies.

China aims for carbon neutrality by 2060

China joins a growing list of countries pledging to go carbon neutral by mid-century. President Xi Jinping announced at the United Nations General Assembly in September that China aims to peak its carbon dioxide emissions before 2030 (previously: until) and achieve carbon neutrality by 2060. China’s existing Nationally Determined Contributions (NDC) include climate and energy targets for reducing CO2 emissions per unit of GDP by at least 60% by 2030 compared to 2005 (2019: -48%) and increasing the share of non-fossil energy (including nuclear power) in primary energy consumption to 20% (2019: 15.3%).

While no further details have been released, Mr. Xi’s announcement implies that China will need to scale up renewable energies, dramatically reduce the dependency on coal, and promote green development in all sectors of the economy. Recent energy policies, released before Mr. Xi’s pledge, still emphasized to continue the “rational development” of coal, without mentioning climate change.

Policymakers are expected to attach much importance to China’s new climate goals when drafting the upcoming 14th Five-Year Plan (FYP, 2021-2025). The Ministry of Ecology and Environment (MEE) already announced to devise a FYP for Tackling Climate Change to guide the overall implementation of the 2030 goal. Further, MEE will draft an Action Plan for Emission Peaking which will extend into the 15th Five-Year Plan period (2026-2030). MEE’s priorities include, amongst others, controlling fossil energy consumption by restricting coal power development, reducing the burning of low-quality, loose coal (散煤 – san mei – as opposed to industrial use of coal, mainly refers to small boilers, home heating, cooking etc.), accelerating renewable energy development, promoting green developments in industry, building, transport and urban spaces, and accelerating the launch of the national carbon market, see article below.

With policymakers still debating the path towards a carbon neutral China, think tanks and universities have started to provide the first projections for a phase-out of coal power, see article here.

Further sources: MEE,

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Energy Supply

Coal, Renewable Energy, Energy Security

China’s energy sector has historically centered around coal-based energy production. During the last decade, however, focus has increasingly shifted towards building a cleaner and more efficient energy supply system. Since 2016, after the State Council and the National Development and Reform Commission (NDRC) initiated the supply-side reform, China’s energy regulators have taken actions to reduce overcapacity in major industries, to accelerate renewable energy development and to increase overall efficiency of the energy system.

However, China has expanded the use of coal power and continuously added new coal power plant capacity in recent years. In 2020, the National Energy Administration’s coal plant early warning risk index gave green light for new power plant additions. At the same time, China continued to decommission outdated coal power plant capacity, shutting down around 7GW of power plants.

NEA releases risk warning on 2023 coal power planning and construction

The NEA’s latest coal plant early warning risk index has given more provinces the green light to construct new coal power plants in 2023. The index is based on coal capacity versus expected local demand, resource constraints, and the economics of coal plant operation in the province. There are 23 provinces classified as green in 2023 on capacity adequacy compared to only 2 provinces in 2020. However, considering the provinces marked as red or orange any of the three metrics (capacity adequacy, resource constraints, and economic risk), for 2023 a total of eight provinces are rated as green for new coal construction on all three risk maps—namely, Guangdong, Guizhou, Chongqing, Fujian, Hainan, Hunan, Hubei, and Inner Mongolia. That’s up from just 6 provinces rated green on all three risk measures in the risk warning for 2022 and 5 provinces for 2021. In 2019, reports from the International Energy Agency, the Rocky Mountain Institute, and the China National Renewable Energy Centre all indicated that China’s electricity demand growth and electrification of industry, heating and transport could be met mainly through a combination of clean energy, energy efficiency measures, and improved regional power market integration.

Six Ministries issued notice to slash overcapacity in key sectors including coal-fired power

China reiterates 1,100 GW of coal for end of 2020, enabling surge in new coal plant completions

In June, six ministries jointly issued plans for reducing overcapacity in key sectors in 2020. According to this plan, the target for total installation for coal capacity by the end of 2020 is 1,100 GW. Since China at year-end 2019 had around 1,040 GW of coal, this cap implies an additional 60 GW of coal for this year. This year, at least 48 GW of new coal-fired power plants are either approved, under construction, or newly completed, according to Greenpeace East Asia. More provinces have been given the green light by national authorities to approve new coal plants under the NEA’s early warning system for coal plant investment, which considers environmental, resource, and economic factors.

NEA notice: China to retire 7.3 Gigawatt of outdated coal power plants

On 14 July 2020, NEA issued a notice on target and tasks for coal power retirement in 2020. The retirement plan outlines to decommission outdated and smaller units with a total capacity of 7.3 GW by December 2020, unless specifically named as contingency units. The provincial administrative authorities shall ensure that the phasing-out is completed on schedule by drawing up detailed decommissioning plans and refining the implementation and approval process. While shutting down the coal power units, the electricity and heat supply security shall be ensured in close coordination with the relevant industries. NEA will conduct monitoring and inspection as required.

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As renewable energy sources have become increasingly cost-competitive in recent years, China’s energy authorities have been exploring “subsidy free” support policies for renewable installations. Still, China’s renewable energy fund continues to face severe deficits.

Renewable energy feed-in tariff subsidy limits set for 2020

NEA has announced that in 2020 the number of renewable energy projects receiving subsidized feed-in tariffs will be limited to the amount of the increase in funds collected from electricity consumers via the renewable surcharge, estimated at RMB 5 billion. New offshore wind power and solar thermal projects will no longer receive central government subsidies, with the exception of plants that are already approved and able to connect to the grid before year-end 2021. The policy also states that renewable feed-in tariffs levels will no longer be published by the government, but rather tariffs will be determined by bidding on a national renewable energy information management platform. The policy essentially continues recent efforts to scale back subsidies and shift renewable energy towards grid parity or market-based prices.

Overview of the financial support for solar power in China for 2020

The Chinese Ministry of Finance (MOF) has set total 2020 funding for solar photovoltaic (PV) at around RMB 1.5 billion, of which RMB 500 million is for private rooftop PV systems and RMB 1 billion is for tendered projects. Compared to last year, the total for solar funding has been halved. On 31 March 2020, the National Development and Reform Commission (NDRC) has issued a notice to adapt the PV feed-in tariff for 2020 which will be implemented in June 1, 2020: This year, the target prices for PV power plants in the three zones will decrease by RMB 0.05/kWh. The subsidy standard for residential photovoltaic systems total power generation is adjusted to RMB 0.08/kWh. Reports from the two Chinese grid operators, State Grid and China Southern Power Grid indicate these grids will accept around 35-40 GW of newly installed PV. All planned projects must be submitted to NEA's provincial offices by June 15 so that they can be considered in the operation of the central government’s tendering. Photovoltaic systems for residential buildings do not have to be tendered and can begin construction immediately.

China continues to tweak subsidies for renewable energy projects

Wind and solar power have continued to fall in cost, and are expected to be competitive with government set tariffs for coal power in most provinces in the near future. For almost a decade, existing renewable energy projects approved for payments of fixed feed-in tariffs have struggled to receive timely payments from a government-established fund, which has experienced a chronic deficit. Over the past two years, various policies and announcements have addressed this issue, as well as provided guidance on how payments will be handled in the future:

  • On 10 October, the Ministry of Finance (MoF) issued a statement that future project approvals will give priority to solar PV tender projects and projects in China’s Top-Runner program. As previously announced, feed-in tariff subsidy payments will not exceed the amount of renewable energy surcharge collected, and the MOF has no plan to raise the surcharge given the economic situation of companies in the sector this year. Read more
  • The Ministry of Finance also stated that payments to existing wind and solar projects will be rationed by annual operational hours, such that projects that produce more energy will not receive payments beyond a certain number of operating hours. The policy effectively cuts subsidies for projects with the best operational efficiency. Read more 1 / 2
  • State Grid has approved a further 5 GW of renewable energy projects for receiving feed-in tariff subsidies, 4.4 GW of which were solar projects. This year, State Grid has approved a total of 61 GW of renewable capacity, of which 36 GW was solar, 24 GW wind, and the remainder biomass. Read more

NDRC and NEA jointly issued draft guiding opinion regarding an integrated system that combines renewable energy with thermal energy and storage

The new policy draft, released by the NDRC and NEA, discusses establishing principles for integrated systems that combine wind, solar, hydro, thermal, and storage on the supply side, as well as systems that integrate generation, electricity loads and energy storage. The policy aims to better coordinate energy sources, grid investments, electricity load, and improve utilization of wind, solar, hydro, thermal (coal and gas) energy. The document mentions that energy security remains top priority, and states that the development of renewable energy will only be prioritized when energy security is guaranteed. The development of renewable energy should reflect the ability of the system to consume and integrate renewable sources, such that the system can keep curtailment of wind and solar curtailment below 5%. The document sets an annual minimum of 40% renewable energy for newly added transmission lines. Thermal power should serve as a flexible system resource. The document also encourages the development of other flexibility resources on the consumer side as well as storage.

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As China experienced an extremely cold winter 2020/21, NDRC and NEA reemphasized the importance of reliably supplying natural gas, electricity, and coal. Energy supply security remains a focus for China’s energy authorities.

NEA listed energy security as priority for energy work in 2020

In late June, NEA issued guiding opinions on energy work and policies for this year (2020). Due to the impact of COVID-19 on the global economy, this year’s guiding opinions emphasize energy security (s. article below). In order to secure the energy supply, China aims at producing 193 million tons of oil, 181 billion cubic meters of natural gas and reaching an installed capacity of non-fossil fuels of 900 GW (2019: 820 GW). NEA raised the primary energy consumption target to 5 billion tons of standard coal – compared to 4.55 billion tons of standard coal mentioned in NEA guiding opinions in 2018. Hence, the energy consumption target is now set at the upper most limit of the consumption cap stipulated in the 13th Five-Year Plan (2016-2020) and shall ensure sufficient energy supply for economic recovery. The target for the share of coal in total energy consumption was reduced from 59% (in 2018) to 57.5% indicating gradual progress on reducing (relative) coal utilization. China reached 57.7% at the end of last year. Other than energy security, NEA introduced a new priority: “energy for the benefit of society.”

NDRC and NEA publish guiding opinion on 2020 energy security work

NDRC and NEA released a guiding opinion on 2020 energy security work on 12 June, to promote high-quality energy development and improve energy security and safety capacity. The opinion outlines five areas in which the improvement could take place. The first area is to improve the energy supply capacity by accelerating the decommissioning of old coal plants that do not meet safety and environmental protection requirements, building coal-wind-solar-storage pilot projects in West China, and increasing domestic oil and gas production. The target for total hydro capacity is set to be 340 GW and that for wind and PV is 240 GW each. The second area is to promote the construction of energy transportation, such as coal railways, transmission grids, port capacity, and oil and gas pipelines. The third area is to strengthen energy storage capabilities through coal storage, power system regulation and gas storage infrastructure. The fourth area is to better manage energy demand through demand-side management, energy efficiency measures, peak-shaving capacity of natural gas, and the establishment of energy markets. The last area is to strengthen safeguard measures such as emergency planning, energy monitoring, and early warning systems that evaluate the need for coal power in each province according to the analysis of capacity adequacy and resource constraints.

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Power Market

NDRC and NEA jointly issued medium- and long-term power trading principles

In June, NDRC and NEA jointly issued a set of principles for medium-and long-term power trading – which in China refers to monthly and yearly power contracts. This revises a previous document that set provisional trading principles. Compared with the provisional principles, the document now includes distribution, wholesale and energy storage companies as market participants. The type of medium- and long-term trading products are also diversified to include trading of electricity itself, generation trading rights, and contract transfer. Transmission rights and capacity can also be traded when there is need in the market. Price is determined solely by the market, and not subject to third party interference. Market users now need to pay for ancillary services. Wholesale power producers, end-users, and grid companies are responsible for ensuring full consumption of clean energy. In terms of balancing the amount of agreed electricity trading amount and the actual needs in the market, the document permits adjustments to be made one week before contract execution upon mutual agreement. The document also encourages trans-regional and trans-provincial power trading.

NEA issues draft on information disclosure for spot markets

The NEA’s new draft on information provides additional details on what types of information must be shared among different market participants to enable a well-functioning spot market—which generally requires much more information transparency for participants versus traditional dispatch schedules. Renewable generators should provide day-ahead and real-time generation forecast and data. Grid companies should disclose basic grid information, grid equipment information, and information about spot trading regions with nodal prices. Information related to the market boundaries, forecasting, and operation should be disclosed by power trading or dispatching organizations. Additionally, to enable more accurate forecasting, with the consent of the user, market.

NDRC issues goals and targets for regional power trading

The National Development and Reform Commission (NDRC) has issued a new policy that calls for greater standardization of electricity trading institutions. The policy includes items related to improved transparency of trading platforms, details on ensuring efficient, market-based price formation, and establishing systems for power market risk prevention and control. The document sets year-end 2020 as a target for improving regional market integration, setting clear electricity dispatch rules and procedures, and improved regional integration. The document calls for further integration of regional electricity trading institutions in Jing-Jin-Ji (Beijing, Tianjin, Hebei), the Yangtze River Delta, and the Pearl River Delta. The document sets the end of 2025 as the date for completing a nationwide unified power trading system with standardized regulatory bodies, complete functions (mid- and long-term trading, spot markets, ancillary services markets), and efficient coordination.

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NEA calls for public comments on establishing long-term mechanism for clean energy consumption

NEA has released a draft ‘Guiding Opinion on Establishing and Improving Long-Term Mechanisms for Clean Energy Consumption’, which discusses how near-term targets for renewable energy are set at the provincial level, urges the acceleration of the spot market and ancillary services markets, and suggests coordination of existing mechanisms such as green certificates, renewable obligations, and the coming spot market. The draft also lists areas for promotion including electric heating, flexible EV charging, hybrid wind-solar-storage plants, and renewable hydrogen. GIZ, together with ClientEarth and other international organizations, jointly submitted comments to the draft, welcoming the promulgation of this policy and arguing for greater emphasis on long-term incentives instead of setting near-term limits on renewables.

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Energy Consumption

The principle “energy efficiency first” continues to shape the Chinese energy transition. Since the 13th Five-Year Plan (2016-2020), limiting the total amount of energy consumption and setting targets for lowering energy intensity (‘dual control’ policy) have been at the centre of China’s energy efficiency policy making. Although the dual target was met on national level, many provinces struggle to achieve the administrative targets.

New manufacturing and services policy draft highlights role of life-cycle costs and energy conservation

On 15 July, 15 ministries including MIIT and NDRC jointly issued the Guiding Opinion on promoting the development of service-oriented manufacturing, an emerging business model and development trend that combines service and manufacturing across sectors. By promoting the transition and upgrading of the manufacturing industry and encouraging new business models, the policy aims to identify, select, and develop 200 demonstration service-oriented manufacturing enterprises, 100 demonstration platforms (including application service suppliers), 100 demonstration projects, and 20 demonstration cities, by the end of 2022. In particular, the target is for the demonstration enterprises to have more than 30% share of income from providing services and increased awareness and capacity across the sector. It aims to scale up demonstration enterprises, platforms, projects, and cities by 2025. The policy also points out the importance of life-cycle cost management and energy conservation and environmental protection as two pillars for developing service-oriented manufacturing.

MIIT published energy diagnosis guideline for key industries

In order to accelerate the promotion of industrial energy-saving diagnostic services and further regulate the standards and requirements  and improve the services quality, the Ministry of Industry and Information Technology (MIIT) released the Guidelines for Energy-saving Diagnostic Services for Industrial Enterprises. The guidelines cover six key industries, including steel, cement, electronics, textiles, food and paper.

NDRC and MoJ release guiding opinions on policy framework for green production and consumption

In March, the NDRC and the Ministry of Justice (MoJ) published an “opinion on accelerating the introduction of environmentally friendly production and consumption rules and policies.” Although the document is not a law or regulation, it can be seen as guiding thoughts by NDRC and MoJ for fostering the development of a regulatory and policy system for green production and consumption. The overall goal is to improve and implement green production and consumption related regulations and laws and implement green production and consumption modes in key sectors by 2025. Specifically, the document aims to promote the development of clean energy sources (including hydrogen, ocean energy and other new energy sources, and clean coal) and green industrial production, green products and services, further develop green solutions for agriculture, circular economy and wastewater management, promote a green lifestyle, and strengthen industrial pollution governance.

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Regional Energy Transition

Local governments are actively developing energy transition policies and regulatory guidance for sub-national level.

Shandong province adopts ambitious hydrogen development plan

Shandong provincial government published an Action Plan for Constructing International Industrial Parks outlining industrial development targets for the cities of Jinan, Qingdao and Yantai, and setting ambitious goals for the hydrogen industry. Jinan, the provincial capital, shall focus, amongst others, on developing the whole supply chain from hydrogen generation and storage to transportation, products and R&D. Shandong Iron and Steel Group and Taishan Steel, two state-owned steel producers, will provide hydrogen as a by-product from steel production. Shandong has announced to release a Medium and long-term Development Plan for Hydrogen Industry later this year and aims at developing Shandong into an hydrogen industry belt with Jinan as China’s Hydrogen Valley and Qingdao, a port city, into an Hydrogen Island, including various pilot projects on hydrogen and fuel cell technologies.

Hainan issues energy plan calling for a shift to gas, nuclear, and renewables

In July 2020, the Hainan government issued the Integrated Energy Reform Plan of Hainan. According to the Plan, the province aims at covering 50% of local primary energy consumption with clean energy sources (which it defines to include gas, nuclear, and renewables) by 2025, and completing the transition towards these sources by 2035. In 2018, Hainan抯 primary energy fuel mix was 33% coal, 32% oil, 18% gas, and 17% non-fossil energy. The plan covers several fields of action: improve energy supply; increase energy efficiency and encourage clean energy consumption on the demand side (including the introduction of energy contracting management to advance energy efficiency in buildings); promote decentralized energy systems in rural areas; improve the energy market by expanding energy system reform, and establishing an open and competitive power market; improve the regulatory environment for energy sector in accordance with the Foreign Investment Act; facilitate innovation and digitalization, and strengthen R&D on innovative technologies such as hydrogen and energy storage; support international investment in Hainan‘s energy sector. The energy reform plan adds to various national pilot projects currently underway in the southern island province. Amongst others, the province is a pilot zone for fulfilling President Xi's vision of an Ecological Civilization, and the central government announced to make it a free trade
port by 2025.

Guiding opinion on accelerating development in western China points out energy development trend

The ‘Guiding Opinion on New Statuses and Trends of Western Region Development’ issued by the Communist Party of China (CPC) and the State Council has pointed out several important trends, including energy development, for the western provinces of China. One of the priorities is to improve the energy supply and demand structure in western provinces, so that by 2035 these regions can reach an almost equivalent level with eastern provinces, regarding modernization, access to basic public services, infrastructure interconnectivity, and living standards. In the field of energy, the document emphasizes to (1) improve coal production and consumption mix, including clean and efficient use of coal, and demonstration of coal conversion projects; (2) build oil and gas production bases in western provinces; in terms of renewables (3) strengthen renewables electricity local consumption, as well as UHV transmissions to the eastern region. It is also worth mentioning that the document proposed the upgrading of distribution grids – for the first time on national level, which is crucial for promoting local consumption of renewable energies. The guiding opinion also mentions supporting energy-intensive industries, qualified in terms of environmental protection and energy efficiency standards, to relocate to the west, where clean energy sources are abundant.

Western regions encourage development of hydrogen and renewables

NDRC recently published a ‘Catalogue of Encouraged Industries in China’s Western Regions’ for public consultation. The Catalogue reveals that many western provinces attach much attention to the development of hydrogen and renewables. Guizhou province, located in Southwest, for instance, listed hydrogen production, fuel cell manufacturing, transport and refueling infrastructure and other hydrogen-related industries as encouraged industries. Shanxi, a traditional coal province, included wind, solar and hydrogen plant engineering as well as services for thermal power plants and hydrogen. Inner Mongolia lists hydrogen as an energy storage solution. Apart from hydrogen, renewables, energy saving, energy storage, energy service, e-mobility and other green manufacturing-related industries were included in the catalogue. Industries listed in the catalogues are expected to receive preferential treatment when investing in the respective provinces and be supported by promotional policies.

Shanxi Province not to grant priority dispatch to coal-fired power units approved after 2015

Shanxi's energy bureau has released a plan for energy development which names renewable energy as the top priority for the development of new capacity. As further priorities besides RE, the plan lists generation capacity for grid regulation with the stated goal of ensuring energy security as well as generation from back-pressure cogeneration units and gas-fired cogeneration units during the heating season. Coal power plants approved after the release of the central government’s policy to promote power system reform in 2015 will no longer receive prioritized dispatch and feed-in tariff . The new procedure took effect on 1 November 2020.

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Green Finance

The People’s Bank of China (PBoC), together with NDRC and the China Securities Regulatory Commission, removed coal-related projects from an annual list projects eligible for green bonds. Along with the Ministry of Ecology and Environment (MEE), they also clarified the definition of “green finance” to boost climate financing in support of both mitigation and adaptation efforts.

China excludes clean coal projects from list eligible for green bonds

China’s central bank excludes clean coal projects from a draft list eligible for green bonds. The proposed list is an important signal in the strongly coal-dependent country to acknowledge the role of green technologies in the future energy system. The decision has been a long time coming, as China seeks to align its Green Bonds with international standards to increase the market’s attractiveness for foreign investments. Despite the recently proposed revision of the list, a large share of green bonds already met international standards. In 2019, China issued 49 billion EUR of green bonds of which 27 billion EUR met international standards - making the country the second-largest issuer after the United States.

Climate finance policy aims to raise amount of low-carbon finance by 2025

The central government issued a guiding opinion on boosting finance in the field of climate mitigation as well as adaptation. This is the first policy in China that defines climate finance as financing or investment intended to achieve the Nationally Determined Contributions (NDC) and low-carbon development goals, and as an important component of green finance. In the field of climate finance, it intends to establish standards, launch and implement local pilots, and build up research institution expertise by 2022. By 2025, the policy aims to increase the financing of climate-protection through greater synergy between climate, finance, sectoral policies, energy policies, and environment policies. Other measures include improving climate finance standards and developing demonstration/pilot projects, in an effort to broaden stakeholder participation.

Sending positive signals to China’s climate action, the policy would play an important role for the country to achieve peaking before 2030 and carbon neutrality by 2060. The guiding opinion was issued by, amongst others, the Ministry of Ecology and Environment (MEE), the National Development and Reform Commission (NDRC), and the People’s Bank of China.

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