China releases top level policy guidance and action plan to achieve climate target

A step closer to China's carbon dioxide peaking before 2030 and carbon neutrality before 2060 goal
Source: Shutterstock/1140044018
Source: Shutterstock/1140044018
Top-level design - China's "1+N" policy system to achieve climate neutrality

On 24 October 2021, the CPC Central Committee and the State Council issued the Working Guidance for Carbon Dioxide Peaking and Carbon Neutrality in Full and Faithful Implementation of the New Development Philosophy” (the Guidance), which is the guiding principle (the “1”) of the earlier announced “1+N policy system” to achieve carbon dioxide peaking and carbon neutrality goals. The Guidance can be understood as the top-level, overarching green and low carbon transition guidance for China’s national and international development strategy. It also lays the foundation for supporting measures in key industries and other areas.

 “N” stands for “Numbers of” action plan for carbon peaking by 2030 and relevant policies and action plans for key areas and sectors including energy, industry, transport sectors, circular economy among others. Two days later, on 26 October 2021, China’s central government issued the first "N", - the "Action Plan for Carbon Dioxide Peaking Before 2030" (the Action Plan). Unlike the Guidance which covers both carbon peaking and carbon neutrality target, the Action Plan focuses on the roadmap on concrete measures for CO2 emission peaking before 2030, which covers the 14th and 15th Five-Year Plan period

Aim of the Guidance and the Action Plan

The Guidance aims to align the set 2030 carbon peaking and 2060 carbon neutrality targets and implementation with the overall social and economic development, taking comprehensive green transformation of economy and society as the leading principle and the green and low-carbon development of energy sector as the key. Carbon dioxide peaking and neutrality will follow the principles of

"Exercising nationwide planning, prioritizing conservation, leveraging the strengths of the government and the market, coordinating efforts on the domestic and international fronts, and guarding against risks ".

It also aims to combine an overall national strategy with implementation based on local circumstances. The document advocates energy conservation, balancing the role of both government and market and coordinating domestic and international energy resources to reduce carbon emissions.

The Action Plan shares the same direction as the Guidance on task focuses but sets slightly different priorities in regards of the specific task focuses, as it’s major objective is to peak CO2 emission by 2030. Considering that energy and industry contribute the major CO 2 emissions in China, the Action Plan placed green and low-carbon transition in energy, energy saving and carbon efficiency reduction and carbon peak actions in industry are placed at the forefront.

Both documents point out the main objective in reducing energy consumption and expanding renewable energy together with CO2 emission reduction target. This indicates that the focus before achieving CO2 peaking will be laid on carbon intensity reduction and accelerating renewable energy in all sectors and levels.

The Guidance specifies responsibility & overall coordination

According to the Guidance, to strengthen overall coordination, “the National Development and Reform Commission (NDRC) will work with local authorities and relevant government departments to organize the implementation of the Action Plan for Carbon Dioxide Peaking before 2030. The NDRC will ensure alignment between the work progress of all localities and relevant departments on a regular basis, strengthening tracking, evaluations, supervision, and inspections and coordinating efforts to resolve major issues during implementation. Relevant departments must increase coordination and cooperation, foster strong synergies, and ensure policies are consistent in direction and their implementation is well-aligned.”

The Guidance poses international positioning

The Guidance indicates China’s ambition to take a stronger and more active role with regards to:

  1. “continuing to increase China’s influence and voice on the world stage
  2. the importance of deepening exchanges and cooperation with other countries on “environmental-friendly technology, equipment, services and infrastructure construction”
  3. the promotion of South-South cooperation to “help other developing countries better addressing climate change”
  4. the active encouraging of the “going global” of China’s new energy and other green low-carbon technologies and products, making “green development a defining feature in the joint pursuit of the Belt and Road Initiative”
Significance for the energy sector (the Guidance vs. the Action Plan)

The energy-related content in the guidance is mainly concentrated in Part 5 “Accelerating the Development of a Clean, Low-Carbon, Safe and Efficient Energy System". It covers five key aspects including overall energy consumption control, increasing energy efficiency, lowering fossil energy consumption, expanding non-fossil energy, and promoting power system reform.  Apart from reemphasizing the facts and figures regarding goals and development pathway which were released earlier, the guidance shows in general a more ambitious, comprehensive, and determined tone across all sectors and aspects.

Further important information and energy related messages in the Guidance and the Action Plan

Part 3 on green transformation in economy and social development states the leading role of the green and low-carbon development plan, and it requires the integration of carbon dioxide peaking and carbon neutrality goals into medium and long-term socio-economic planning. It promotes a regional development plan which is conducive to achieving carbon dioxide peaking and carbon neutrality goals and advocates a green lifestyle and a green manufacturing style.

Part 4 on industrial restructuring addresses:

  • Developing implementation plans for carbon dioxide peaking in key sectors (energy, iron and steel, non-ferrous metals, petrochemicals, building materials, transportation, construction, etc.).
  • Constructing carbon dioxide peaking pilot parks.
  • Strictly controlling the development of energy-intensive industries (steel, cement, plate glass, electrolytic aluminum, etc.) through measures such as raising access standards and overcapacity warnings.
  • Plans to introduce capacity control policies for coal power, petrochemical and coal chemical industry.
  • To accelerate the development of new industries including renewable energy and intelligent systems.

Expanded information from the Action Plan:

  • Strictly prohibit additional production capacity in steel, new cement clinker and flat glass production capacity
  • By 2025, domestic capacity for primary refining of crude oil will be kept below 1 billion metric tons, and the utilization rate of production capacity for main products will rise to 80% or more.

Part 6 on low-carbon transportation system promotes:

  • Optimizing the transportation structure.
  • Accelerating the development of low-carbon and energy efficient vehicles and vessels consuming new energy and clean energy.
  • Accelerating the construction of a charging network and improving energy efficiency standards of gasoline vehicles and vessels.
  • Advocating low-carbon transportation.

Expanded information from the Action Plan:

  • Strive to reach peak in petroleum consumption for land transport before 2030
  • By 2030, reach share of incremental vehicles fueled by new and clean energy of around 40%
  • Cut carbon emission intensity of commercial vehicles measured on the basis of converted turnover by about 9.5% compared with 2020
  • Cut comprehensive energy consumption of national railways/unit of converted turnover by 10% compared with 2020
  • By 2030, no less than 70% of travel will be conducted through environmentally friendly means in cities with permanent populations of one million or more

Part 7 on green and low-carbon development of urban and rural areas requires to

  • Promote low-carbon transformation in urban and rural development and management;
  • Raise the energy efficiency standards for new buildings, to accelerate the large-scale development of ultra-low, near-zero energy and low-carbon buildings;
  • Improve the energy consumption structure of buildings, to deepen the utilization of renewable energy in the building sector,
  • Promote building sector electrification, to install rooftop photovoltaic, and to promote clean low-carbon heating through heat pumps, gas, biomass, geothermal energy, etc.

Expanded information from the Action Plan:

  • By 2025, all newly constructed buildings in urban areas will meet green building standards.
  • By 2025, renewable resources will account for 8% of the alternative to conventional energy used in buildings, and we will strive to reach 50% photovoltaic coverage on the roofs of newly constructed public buildings and factories.

Part 8 on green and low-carbon technologies and application promotes

  • Improving the technologies for energy storage materials, high efficiency solar batteries, green hydrogen, as well as controllable nuclear fusion and zero-carbon industrial process re-engineering;
  • Supporting the application of technologies for integrating large-scale renewable energy, hydrogen production, storage, and application, as well as CCUS research, demonstration and industrial application.

Part on improving carbon sink capacity” requires to

  • Consolidate the ecosystem capacity through planning and use regulation of territorial space, ecological red lines and implementation standards for land use;
  • Upgrade carbon sink capacity through ecological restoration, reforestation, wetland and marine conservation, and ecological agriculture. 

Expanded information from the Action Plan:

  • Expand forest coverage around 25% of China’s total land area and increase forest stock volume to 19 billion cubic meters by 2030.

Part 10 on green and low-carbon mode of opening up

  • Promotes accelerating the development of a green trade system;
  • Promotes a green Belt and Road Initiative and exporting renewable energy and low-carbon technologies;
  • Strengthens international exchange and cooperation on climate, emphasizing the responsibility and commitment of climate governance and compliance while adhering to the positioning as a developing country and safeguards its development rights and interests.

Expanded information from the Action Plan:

  • Intensify green finance cooperation across the world, actively participate in carbon pricing and global macro policy coordination on green finance standards
  • Make overseas projects more environmentally sustainable, develop a BRI energy partnership characterized by green development and inclusiveness
  • Expand the export of new energy technology and products
  • Bring into full play the role of cooperation platforms such as the BRI International Green Development Coalition, advocate the Green Investment Principles, advance the implementation of the Belt and Road South-South Cooperation Initiative on Climate Change and the Belt and Road Science, Technology, and Innovation Cooperation Action Plan

Part 11 on improving laws, regulations, standards and statistical and monitoring systems promotes:

  • Revising the Energy Conservation Law, Electricity Law, Coal Law, Renewable Energy Law, and others, as soon as possible, however, the guidance does not mention the Energy Law drafted by the NEA in 2020.
  • Refining standards and measurement systems: the Guidance requires to establish and revise a series of standard systems ranging from energy consumption caps to carbon emission accounting and GHG emissions for key industries, and it requires active participation in formulating relevant international standards and ensuring domestic standards are consistent with international ones.
  • Improving statistical and monitoring capacity: the Guidance requires establishing a comprehensive statistical, monitoring and measurement system for energy consumption in key industries; to enhance CO2 accounting capacity and enhance the quality of measurement using information technology.

Expanded information from the Action Plan:

  • Take part in international cooperation for accounting method development, thus promoting the establishment of fairer and more equitable carbon accounting systems
  • Actively participate in the formulation and revision of international standards on energy efficiency, low-carbon development etc., and strive for better alignment of these standards

Part 12 on improving policy mechanisms is the longest part of the text except for Part 5. It names measures regarding investment, financial, fiscal, tax, price, and market mechanisms to ensure the success of the carbon dioxide peaking and carbon neutrality goals.

  • Investment policy: to establish an investment and financing system compatible with carbon dioxide peaking and neutrality, strictly control carbon emission-intensive projects such as coal power and iron and steel, increase investment in energy conservation, renewable energy and low-carbon transportation.
  • Green finance: to promote the development of green and low-carbon finance products and services, to establish monetary policy tools for carbon emission reduction, and incorporate green credit into the Macro Prudential Assessment (MPA) framework, and to establish a national low-carbon transition fund.
  • Fiscal, tax and pricing policies: to promote carbon reduction in energy conservation and environmental protection, new energy transportation and other emission reduction by increasing financial support, improving government green procurement standards and tax preferences; to improve price mechanisms conducive to the development of renewable energy on a large scale; to improve differentiated electricity tariffs, tariffs varying over time and residential ladder tariffs; strictly forbid preferential electricity tariffs for energy and emission intensive industries; to accelerate the promotion of heating supply metering reform and to apply a pricing policy based on the amount of heat that is supplied (presently pricing is based on the heated area irrespective of consumption, providing no incentives for efficiency).
  • Market-based mechanisms: to improve the systems for the paid use and trade of energy consumption permits and speed up the development of a national market for such permits in addition to improving and expanding the carbon emissions trading system; to better coordinate and align the trading of electricity, energy consumption permits, and carbon emission permits. After the release of the "Concept for Energy Consumption Permits and Trading System Pilot" by the NDRC in 2020, China reassures its determination to establish an energy consumption permits trading market, and it will become the first country with an energy consumption quota trading system.

Extensive details from the Action Plan:

  • Establishing a sound green finance standard system, expanding green bond market, research to set up a national fund for low-carbon transformation to support traditional industries, and mobilizing social capital for green development

Click here for the full English version of the Working guidance for carbon dioxide peaking and carbon neutrality in full and faithful implementation of the new development philosophy” (the “1”)

Click here for the full English version of the Action plan for carbon dioxide peaking before 2030 (the first “N”)