China’s industrialization has happened at a breakneck pace, lifting hundreds of millions of people out of poverty and turning the country into the factory of the world. It has also made it the biggest emitter of carbon dioxide, the main greenhouse gas responsible for climate change. The most populous country has set itself the ambitious goal of becoming carbon neutral by 2060, an ambitious target given that it has not even reached its peak in emissions. To achieve this, President Xi Jinping wants to move away from an economy dependent on coal and other fossil fuels by switching to renewable energies and developing new technologies to capture emissions.
1. What is carbon neutral?
This means reducing your carbon dioxide emissions as much as possible and then compensating for what you cannot eliminate. For a country, that could mean switching to renewables like solar power instead of coal and investing in projects that absorb carbon dioxide, like reforestation. Carbon neutrality has become a goal of companies and countries to address public concerns about the impact of emissions on the climate.
2. What is China’s goal?
Even though China is the world’s second-largest economy, it is still ranked as a developing country and has not reached its peak in emissions. This is expected to happen by 2030, with Xi pledging to achieve carbon neutrality by 2060, 10 years after the US deadline set by President Joe Biden. If China succeeds, it would be the fastest drop in maximum emissions among the major economies, faster than the EU 70-year target and the US 40-year target. China’s plan, which the country’s climate envoy says includes all greenhouse gases and not just carbon dioxide, would boost global efforts to limit rising temperatures and potentially give it a boost. great influence on world issues.
3. What should be done?
China must find substitutes for the fossil fuels that have fueled its economy and rapid urbanization. A key first step was taken in July when China opened the world’s largest carbon emissions trading market, creating a framework for pricing and regulating emissions in the country. It is already pushing for the expansion of electric vehicles and automation while investing in nuclear power, which does not emit greenhouse gases. There is more spending on researching technologies such as storage batteries and the use of hydrogen as a fuel to supplement low-emission energy sources. The government will need to develop more wind and solar energy projects so that coal-fired power plants play a smaller role in electricity generation. Local authorities have been urged to develop regional plans to reduce emissions and some have already taken steps to limit what they perceive to be unnecessary uses of electricity, such as Bitcoin mining.
4. How will this affect economic policy?
The primary goal of the ruling Chinese Communist Party is to create a “great modern socialist country” to ensure prosperous life for its citizens. It is a mantra that demanded continued economic growth and led to increased pollution. Breaking the link between growth and emissions will require policies that target fossil fuels and encourage the development of renewable energies. Monetary policy will need to be adjusted if the transition causes inflationary pressures. Beijing will also need to support vulnerable sectors and regional economies during the decarbonization process. For example, the Shanxi coal industry contributes 20% of the province’s revenue, according to PingAn Securities chief economist Zhong Zhengsheng.
5. What will be the economic impact?
Services and high-tech will need to increase their contribution to the economy, a move that could trigger investment demand of up to 300 trillion yuan ($ 46.3 trillion), according to the People’s Bank of China. The central bank said much of the funds will come from market investors, but a policy framework that encourages private investment will be important. This is in addition to cleaner air, improved road safety, and prevention of potential climate damage which the World Bank estimates could account for 3.5% of gross domestic product by 2030. These benefits must be weighed against the impact on ordinary Chinese people of a restructuring that gradually eliminates jobs in carbon-emitting sectors, with the coal mining and processing industry alone 3, 5 million workers.
6. Who are the biggest losers?
China’s 2,200 fossil-fueled electric utilities, a group that accounts for nearly half of the carbon that China releases into the atmosphere and 14% of the global total, are among the first to feel the impact of the the country’s carbon market. Electricity is one of eight industries that account for nearly 90% of its carbon emissions, a group that also includes steel, building materials and transportation, according to a report by China International Capital Corp. Eliminating their dependence on fossil fuels will require a move to cleaner sources such as wind and solar power and spending on mitigation measures or carbon offsets. Chinese regional economies that rely heavily on fossil fuel production, such as the provinces of Shanxi and Inner Mongolia, will also be affected.
7. Who does it benefit from?
Manufacturers of electric vehicles are one of the main beneficiaries of the Chinese plan thanks to government subsidies. Beijing has set a target that new energy vehicles will account for 20% of sales by 2025, up from 6% in 2020. Utilities switching to renewable sources will also benefit, as will service providers such as emissions measurement and carbon trading. , according to Nannan Kou, head of research in China for BloombergNEF. Other winners could include manufacturers of photovoltaic systems, recycling companies and producers of new materials and non-ferrous metals for the assembly of electric vehicles.
8. What role will the central bank play?
China’s goal of carbon neutrality is shared by major Chinese institutions and is a top priority for the PBOC. The central bank has removed so-called clean coal projects from its definitions of green bonds while pledging to revamp the tools so that it can offer cheap funds to banks to encourage more environmentally friendly lending . Regulators are also planning to adjust the rules on capital adequacy and how it accounts for green assets. At the end of March, China’s green loan outstanding stood at 14 trillion yuan, an amount that is expected to grow at a rapid pace.
9. Will private banks play a role?
Banks will need to change who they lend to and balance how their lending matches Beijing’s climate ambitions. The high capital cost of building power plants, steel plants and factories means that companies in these sectors often have significant financing needs and any rapid changes could affect their ability to manage credit risk, according to Zhou Xuedong, Executive Vice President of the National Development Bank and a former senior official of the PBOC. He said a climate change stress test for financial institutions will be needed.
This story was posted from an agency feed with no text editing.
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