China’s Road to Carbon Peaking and Carbon Neutrality [1st ed. 2023] 9789819931217, 9789819931224, 9819931215

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Guiyang Zhuang Hongchun Zhou Editors

China’s Road to Carbon Peaking and Carbon Neutrality

China’s Road to Carbon Peaking and Carbon Neutrality

Guiyang Zhuang · Hongchun Zhou Editors

China’s Road to Carbon Peaking and Carbon Neutrality

Editors Guiyang Zhuang Chinese Academy of Social Sciences Beijing, China

Hongchun Zhou Development Research Center of the State Council Beijing, China

Translated by Weisi Ni Beijing Chinese-Foreign Translation & Information Service Co., Ltd. Beijing, China

ISBN 978-981-99-3121-7 ISBN 978-981-99-3122-4 (eBook) https://doi.org/10.1007/978-981-99-3122-4 Jointly published with China Financial & Economic Publishing House The print edition is not for sale in China (Mainland). Customers from China (Mainland) please order the print book from: China Financial & Economic Publishing House. Translation from the Chinese Simplified language edition: “碳达峰碳中和的中国之道” by Guiyang Zhuang and Hongchun Zhou, © China Financial & Economic Publishing House 2022. Published by China Financial & Economic Publishing House. All Rights Reserved. © China Financial & Economic Publishing House 2023 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publishers, the authors, and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publishers nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publishers remain neutral with regard to jurisdictional claims in published maps and institutional affiliations. This Springer imprint is published by the registered company Springer Nature Singapore Pte Ltd. The registered company address is: 152 Beach Road, #21-01/04 Gateway East, Singapore 189721, Singapore

Contents

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Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Zhuang Guiyang

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The Proposal and Conceptual Connotations of Carbon Peaking and Carbon Neutrality Goals . . . . . . . . . . . . . . . . . . . . . . . . . . . Chen Ying and Zhang Yongxiang

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The Practice Roadmap to Carbon Peaking and Carbon Neutrality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Zhou Hongchun, Zhou Chun, and Li Changzheng

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Energy Base for Carbon Peaking and Carbon Neutrality . . . . . . . . . . Zhuang Guiyang and Dou Xiaoming

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Investment Demand for Carbon Peaking and Carbon Neutrality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Ying Zhang

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Technological Innovations for Carbon Peaking and Carbon Neutrality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113 Cong Jianhui, Li Rui, and Sun Panting

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Change of Consumption in the Context of Carbon Peaking and Carbon Neutrality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129 Bo Fan

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Comprehensive Economic and Social Response in the Context of Carbon Peaking and Carbon Neutrality . . . . . . . . . . . . . . . . . . . . . . . 151 Zhou Hongchun, Zhou Chun, and Li Changzheng

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Carbon Pricing Mechanism for Carbon Peaking and Carbon Neutrality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173 Wenjun Wang, Chonghui Fu, and Xujie Zhao

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10 Urban Leadership in Carbon Peaking and Carbon Neutrality . . . . . 195 Zhuang Guiyang and Wei Mingxin 11

Synergy for Carbon Peaking and Carbon Neutrality Goals and Economic, Social, Ecological Environmental and Energy Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 217 Xianqiang Mao, Zhi Guo, and Yubing Gao

12 The Role of Carbon Sinks in Carbon Peaking and Carbon Neutrality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 241 Jinliang Li 13 Global Collaboration for Carbon Peaking and Carbon Neutrality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 275 Wang Mou, Xin Yuan, Chen Ying, and Zhang Yongxiang Postscript . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 297

Chapter 1

Preface Zhuang Guiyang

In order to mitigate and adapt to climate change, the international temperature control target is transitioned from below 2°C to 1.5°C (the 1.5°C climate goal, or 1.5°C target) compared to pre-industrial levels, and the world is required to become carbon neutral by around 2050. Recently, the Intergovernmental Panel on Climate Change (IPCC) warned that unless the world achieves net zero greenhouse gas emissions by around 2050, the 1.5°C climate goal will fall through. The international community is paying more and more attention to tackling climate change. In line with the Paris Agreement, China has declared updated intended nationally determined contribution (NDC) targets, and promised to adopt more vigorous policies and measures, strive to achieve carbon peaking by 2030, and achieve carbon neutrality by 2060.

1 The Interpretation of Carbon Peaking and Carbon Neutrality China’s proposal of the latest climate targets for carbon peaking and carbon neutrality has attracted attention from all sectors of society. The “carbon” in the early peaking of carbon emissions primarily refers to carbon dioxide emitted by energy activities. The “carbon” in “strive to achieve carbon neutrality by 2060” refers to greenhouse gases (GHG) in the whole economy. From carbon peaking to carbon neutrality, the gradually expanded inclusion of greenhouse gases conforms to the requirements of the Paris Agreement for the submission of a medium- and long-term low GHG emissions development strategy and more ambitious long-term goals, and also matches China’s economic development needs and capacity to reduce emissions. Z. Guiyang (B) Research Institute for Eco-civilization, Chinese Academy of Social Sciences, Beijing, China e-mail: [email protected] © China Financial & Economic Publishing House 2023 G. Zhuang and H. Zhou (eds.), China’s Road to Carbon Peaking and Carbon Neutrality, https://doi.org/10.1007/978-981-99-3122-4_1

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1.1 Carbon Emissions Are Closely Associated with the Development Stage Carbon peaking refers to the process in which the total amount of carbon dioxide generated by the consumption of fossil energy such as coal, oil, and natural gas in the production and living activities of an economy reaches a peak within a certain period of time (usually a year), and then reaches a plateau and may fluctuate within a certain range before declining steadily. Carbon peaking includes the following factors: the path to peaking, peaking time and target value as well as the path to reduce emissions after peaking. Carbon neutrality refers to achieving zero carbon dioxide emissions by balancing the greenhouse gas emissions directly or indirectly generated by an economy within a certain period of time (usually a year) through afforestation, energy conservation, emissions reduction, etc. Simply put, it achieves net zero GHG emissions by striking a balance between anthropogenic sources of emissions and sinks. The level of carbon emissions is significantly affected by factors such as population, economic development level, industrialization and urbanization, and energy structure. Through observing and summarizing the law of peaking and economic attributes in industrialized countries and regions, it is found that the “double peaks” and “double declines” of carbon emissions and energy consumption often occur after the stage of industrialization and urbanization, during which the economic growth declines dramatically, and the per capita gross domestic product (GDP) keeps at the range of US$10,000–20,000. China is significantly different from industrialized countries in terms of the above factors, undertaking the dual tasks of emissions reduction and quality economic development with high-quality. According to studies, China sees a trend from correlation to decoupling between the growth of carbon dioxide emissions and economic growth as a whole. Objectively, China has a realistic basis for achieving carbon peaking, and it is technically and economically feasible to achieve net zero emission targets on schedule. Under the energy structure dominated by fossil energy, there is a certain correlation between economic development and carbon dioxide emissions. According to estimates by the Norwegian Center for International Climate and Environment Research Oslo (CICERO), global carbon dioxide emissions have been growing since the Industrial Revolution, soaring from 9.3505 million tons in 1750 to 34.075 billion tons in 2020. The vast majority of these emissions were generated in the 120 years since the twentieth century. As Fig. 1 shows, carbon emissions are significantly influenced by economic fluctuations. During the Great Depression of 1929–1933, the capitalist world economic crisis of 1980–1982, the U.S. economic crisis of 1990–1991, the Asian financial crisis of 1997–1998, the international financial crisis of 2008–2009, and the COVID-19 pandemic from 2019 to 2020, both economic activities and global carbon emissions decreased significantly.

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Fig. 1 Global carbon dioxide emissions since the Industrial Revolution (1750–2020) (Source Statistics published on Our World in Data website)

1.2 The Policy Connotations of Carbon Peaking and Carbon Neutrality “Striving to achieve carbon peaking by 2030” is not to reach the peak and compete for space quickly, but to lower the peak level for development, so as to move towards carbon neutrality. The “rushing to peak” model in which a country allows carbon dioxide emissions to grow fast to reach a high peak as soon as possible, and the “peak shaving” model in which a country gradually controls the increase in carbon emissions and reaches a low peak later will lead to diametrically different “economysociety-environment” system after peaking. China adopts the “peak shaving” model. While it raises higher demands for energy and economic transformation in the early stage, it can avoid problems such as high carbon lock-in effect, path dependence and overcapacity, thus making it operable. The carbon peaking target determines the emission trajectory and practice path to a certain extent, and also directly impacts the time and the difficulty of achieving carbon neutrality. Emisson peak is the basis and precondition for achieving carbon neutrality, which in turn is a tight constraint on carbon peaking. China faces the demands of a tighter schedule and more significant emissions reduction than industrialized countries. The sooner the carbon peaking is achieved under the “peak shaving” model, the more time and space there is for achieving the carbon neutrality targets. While achieving carbon peaking by 2030 with greater efforts under existing policies, we face a host of challenges to achieve carbon neutrality targets by 2060 under existing technology and policy systems. From the perspective of the energy system, achieving carbon neutrality necessitates replacing the energy system featuring fossil energy established since the Industrial Revolution with an energy system that features renewable energy, and achieving net zero or even negative emissions of the energy system by means of negative emission technologies such as bioenergy with carbon

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capture and storage (BECCS). From the perspective of technological innovation, lowcarbon, zero-carbon and negative carbon technologies are not yet mature, and there are also problems of difficulty in integration of technical systems, a complex structure of links, diverse types of technologies, and high costs. Systematic technological innovation is urgently needed. Low-carbon technological systems involve renewable energy, negative emission technologies and other fields. Different low-carbon technologies vary greatly in terms of technical characteristics, the scope of application, marginal abatement costs as well as emissions reduction potential. China’s decarbonization cost curve shows that renewable electric power can reduce greenhouse gas emissions from human activities in China by about 50% at a low cost in the early stage. When 75% decarbonization is reached, the curve will enter the range of “high-cost decarbonization”: the annual cost of achieving 90% decarbonization may be up to approximately US$1.8 trillion. It will be difficult for China to achieve carbon neutrality by 2060 under existing technologies if China only continues the current policies, investment and carbon emissions reduction targets. In the final analysis, the underlying problem and principal contradiction in achieving carbon peaking and carbon neutrality lie in energy problems. The revised Kaya identity shows that carbon emissions are primarily associated with population, per capita GDP, carbon emission intensity and energy structure. In China, its population is approaching its peak, the development of geographical space is near completion, and the income level is still improving. China is transitioning from an economy of scale to an economy with improved living standards. In 2020, China’s aggregate economic output exceeded 100 trillion yuan. The strong national comprehensive strength provides a solid economic foundation for achieving the “dual carbon” (carbon peaking and carbon neutrality) goals. Therefore, controlling carbon emissions focus on reducing carbon intensity and adjusting the energy mix. Of course, in addition to paying attention to carbon dioxide emissions reduction, it is also necessary to control non-CO2 greenhouse gases. An extensive and profound linkage has been established for all aspects of social production and life through energy and electricity. Maintaining a high proportion of renewable energy and optimizing the energy structure are the fundamental measures to achieve the goal of carbon peaking ahead of schedule. Controlling total energy consumption, enhancing energy efficiency through technological innovation and replacing traditional fossil fuels with renewable energy will perform a key role in carbon dioxide emissions reduction. In the foreseeable future, China will still see an upward trend in total energy consumption, and there is a continuously dwindling space for improving the industry’s energy efficiency. Therefore, developing an energy system with renewable energy is the top priority for achieving the “dual carbon” goals. The construction of a new-type electric power system is a key strategic measure to achieve the “dual carbon” goals. The core feature of the system is to promote renewable energy represented by new energy sources such as wind power and photovoltaic power to become the primary sources of power supply. With the large-scale connection of renewable energy power to the grid as well as high-penetration scattered access in the future, the volatility and uncertainty of power output such as wind

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and photovoltaic power will bring more complex challenges to the power system’s security and stability. It is expected that there will be a pattern of “three sectors and mutual complement” for electric power resources: renewable energy becomes the primary source of power, providing the principal power support; large-scale controllable power supply, which serves as a flexible power source to maintain a safe and stable power system, provides essential regulation services; the ubiquitous shortterm battery energy storage and the necessary long-term energy storage constitute the systematic adjustment capacity for the entire time scale.1

2 The Significance of Carbon Peaking and Carbon Neutrality Carbon peaking and carbon neutrality set new goals for and give a new impetus to China’s low-carbon development in a new stage of development. This conforms to the internal logic of China’s low-carbon development strategy. This strategic deployment meets the inherent requirement of China’s sustainable development, and is also a necessary choice for maintaining climate security and building a global ecological civilization.

2.1 Build a New Paradigm for Ecological Civilization Development and Pursue High-quality Economic Development From the perspective of domestic action logic, China has in recent years been seeking a model of more sustainable, inclusive and resilient economic growth. The proposal of “dual carbon” goals marks a new height for China’s green development and becomes one of the main keynotes of China’s social and economic development in the few decades to come. China includes carbon peaking and carbon neutrality in the overall plan of ecological advancement and conservation, and the realization path will be planned in light of China’s national conditions. China pursues the path of quality economic development, balancing between economic development and emissions reduction. Whereas in fact, China’s path to carbon peaking and carbon neutrality dovetails with the theory of ecological civilization. Based on the reflection and sublation of the concept of industrial civilization, China puts forward the thinking on promoting ecological progress, which conforms to the prevailing trend of global

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Yuan Jiahai and Zhang Haonan (2021).

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sustainable development, and also provides a new idea and guiding method for tackling climate change. The thinking on ecological progress guides China’s actions for carbon dioxide emissions reduction and addressing climate change. At the same time, China’s achievements in the green and low-carbon economic and social transformation as well as carbon dioxide emissions reduction corroborate the positive role of the thinking on ecological progress in the global climate governance field. Ecological civilization emphasizes harmony between man and nature, between man and society, and between people. To tackle climate change, it is necessary to take a scientific attitude to view the relationship between man and nature; it is required to change the ways of work and life that cause high pollution and high emissions, to curb the overexploitation of natural resources, and to fundamentally eliminate the causes of climate change; it also requires people’s mutual respect, mutual help, integrity, and mutual understanding, as well as concerted efforts and sincere cooperation to promote the in-depth integration of regional resource endowment. Carbon peaking and carbon neutrality emphasize industrial restructuring, and productionside energy saving and carbon reduction, and also advocate moderate, low-carbon and healthy ways of consumption and life. In terms of natural development, conservation and terminal treatment, it upholds nature-based solutions, the development of a circular economy, and the restoration of ecological dividends. This is consistent with the thinking on ecological progress that observes the unity of man and nature, the harmony between human behavior and nature, as well as the harmony between moral reason and natural reason. On the other hand, carbon peaking and carbon neutrality are a crucial part of creating a new pattern of development. China has entered a new stage of development and embarked on a journey to fully build a modern socialist China. The Fifth Plenary Session of the 19th Central Committee of the Communist Party of China put forward the plan to foster a new double development dynamic, with the domestic economy and international engagement providing mutual reinforcement, and the former as the mainstay, under the guidance of the new development philosophy. The “development” in the new development pattern refers to green, low-carbon and sustainable high-quality development. When planning the new development pattern, we should consider to security and development, present and long-term development, self-improvement and opening up. Carbon peaking and carbon neutrality are required to play an incentive and constraint role in this process. At the same time, the new development pattern, which calls for multi-goal coordination and multi- perspective systematic planning, will facilitate and ensure the realization of the “dual carbon” goals. The Fifth Plenary Session of the 19th Central Committee of the Communist Party of China clarified the long-range objectives through the year 2035 while putting forward the plan to move faster to build a new development pattern. Moreover, China also faces a slew of short-term and medium- and long-term objectives, such as the United Nations Sustainable Development Goals and the basic realization of the modernization program by the middle of the twenty-first century. Giving comprehensive consideration to multiple goals helps us effectively identify substantive issues that may impact the establishment of the new development pattern and the realization of the “dual carbon” goals.

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As an inherent constraint on China’s quality economic development, carbon peaking and carbon neutrality necessitate the establishment of a sound economic system for green and low-carbon circular development, as well as a sound system of clean, low-carbon, efficient and safe modern energy production and consumption. As ecological civilization is being built, the concept of “Lucid waters and lush mountains are invaluable assets” gains growing popularity. In addition to policy guidance, China has stimulated the enthusiasm, initiative and creativity of all parties for low-carbon development through the policy demonstration effect, giving a strong impetus to the realization of the “dual carbon” goals. The policy design logic and political executive force with Chinese characteristics fully demonstrate China’s institutional and market strengths, particularly its strengths in pooling nationwide resources for major undertakings. As long as we continue to apply the new development philosophy and pool the wisdom and strength of society for concerted action, it is not beyond the realm of possibility to secure a victory in this tough battle. China will inevitably achieve the “dual carbon” goals for high-quality economic development instead of pursuing the extensive development model.

2.2 Maintain Global Climate Security and Lead the Green Economic Recovery From the perspective of international action logic, the Earth’s climate emergency has put all countries and regions on the alert. The problem of climate change occurs globally, regardless of time and space. As the world’s largest emitter of carbon dioxide, China emits carbon dioxide more than the combined emissions by developed countries and regions. China’s carbon peaking and carbon neutrality are of global significance. The two most important contributions to the world are: to prevent climate risks and maintain climate security; and lead a green recovery. China is the largest emitter of carbon dioxide. According to the BP Statistical Review of World Energy (2020), China’s total carbon dioxide emissions in 2019 were 9825.8 million tons, accounting for some 28.8% of the world’s total. At the same time, during the evolution of the world development pattern, China’s relative status has undergone a fundamental change, and the international community has high expectations of China’s carbon emissions reduction. In a sense, only when China achieves carbon peaking will there be carbon peaking worldwide; only when China achieves carbon neutrality will the world become carbon neutral. China’s fulfillment of carbon peaking and carbon neutrality helps maintain climate security and mitigate losses caused by natural disasters. Climate change is of a global and systemic nature, and no country or region can remain unaffected by its adverse impacts. As a result of inadequate action in the long term, climate change has evolved from a normal natural phenomenon to an environmental problem, and from a simple environmental problem to a development problem at a higher level. It has now become

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the biggest non-traditional challenge for the security of human development. Highimpact climate events are frequent, marine ecosystems are wrecked, the number of “climate refugees” is rising, and nine of the 15 known global climate tipping points have been activated. According to an article published in the world-renowned academic journal Nature, more than half of the nine tipping points previously indicated have exhibited an active state, and several are in a state of “almost being activated, or having been activated”. According to the Working Group I for the IPCC’s Sixth Assessment Report, the impacts of climate change are mostly irreversible at timescales ranging from 100 to 1000 years. On the issue of protecting humanity from the catastrophic consequences of climate change, “we have no time to waste”. The COVID-19 pandemic that erupted in early 2020 exerts the most severe impact on the world economy since the 1930s, and is having and will continue to have a comprehensive and considerable impact on investment, employment, the economy and action on climate change. The lower energy demand primarily causes a decline in GHG emissions during the epidemic period. The total carbon emissions will inevitably rebound as the economy recovers unless prompt actions are taken to adjust industrial structure and energy structure. Given that the recovery of previous global economic crises was usually accompanied by a significant jump in carbon emissions, the international community calls on all countries and regions to work together to stage a green recovery. China’s efforts for carbon peaking and carbon neutrality not only help avert catastrophic “black swan” climate risks, diffuse the “grey rhino” risk in climate change,2 and mitigate the economic losses caused by climate change to a certain extent, but are consistent with the logic of green recovery as well. Green recovery aims to pursue a sustainable, low-carbon economic and social development path in which development goals and climate goals are compatible. It restores economic development while coping with ecological crises. The key to both lies in rapidly decarbonizing the economic systems, inhibiting the impulse to develop the economy through highcarbon investments, and reducing fossil energy use as well as other sources of greenhouse gas emissions. China’s carbon peaking and carbon neutrality promote the green and low-carbon transformation of the economy and society through energy decarbonization, intending to achieve carbon neutrality in the context of satisfying the people’s growing needs for a better life. In the post-COVID-19 era, China’s “dual carbon” goals send an unmistakable message to the world that response to the COVID-19 pandemic should not and will not be a pretext to halt greater action against climate change.3 China’s work on carbon peaking is holistic, systematic and global, as it covers energy-intensive sectors with high emissions such as energy and electric power, industry, transportation, and construction, and involves all respects like production and consumption, infrastructure construction and social welfare. Oriented to developing green and lowcarbon industrial systems, constructing green infrastructure, etc., China is committed to strengthening cooperation in green energy, green finance and other fields, and 2 3

Pan Jiahua and Zhang Ying (2018). Zhuang Guiyang (2021).

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improving multilateral cooperation platforms such as the Belt and Road Initiative. According to research, large-scale green public investment programs offer a way to revitalize economies and tackle climate change more effectively in the post-COVID19 era. Compared to traditional economic measures, green projects that enhance energy efficiency or use renewable energy can create more jobs, and bring higher short-term returns and long-term cost savings to governments. China’s pioneering efforts will spearhead the green recovery of the world economy, providing a reference for other countries and regions.

3 Orientation of Policy on Carbon Peaking and Carbon Neutrality Since the vision of the “dual carbon” goals was put forward, China has demonstrated its determination to achieve the “dual carbon” goals on many occasions. It is an important task and prerequisite for China to achieve low-carbon, sustainable transformation and honor international commitments by issuing a timetable and roadmap for carbon peaking and carbon neutrality, and using a top-level plan to guide carbon dioxide emissions reduction under the new historical circumstances.

3.1 China’s Achievements and Challenges in Low-Carbon Development and Emissions Reduction China has always attached great importance to by tackling the issue of climate change by implementing the national strategy of actively dealing with climate change. China has adopted a slew of measures to adjust the industrial structure, optimize the energy mix, conserve energy and improve energy efficiency, promote the establishment of carbon markets, and increase forest carbon sinks, and has achieved positive results in key areas such as formulating strategic plans for the control of GHG emissions, reforming institutional mechanisms, and raising social awareness and capacity building. Its experience lies in internally promoting mitigation and adaptation actions, aligning the response to climate change with sustainable economic and social development, and externally upholding the joint establishment of multilateral climate governance mechanisms with the international community. In practice, China leverages its institutional strengths to specifically assign the administrative goals of energy saving and carbon emissions reduction to local governments and departments, maximizes the role of cities as the mainstay and leader, and promotes emissions reduction in key sectors such as energy and electric power, industry, construction, and transportation. As a result, China has made progress in the coordinated reduction of air pollutants and carbon dioxide emissions. At the same time, China has conducted low-carbon pilot programs of many types in many

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regions through the “pilot-diffusion” mechanism, such as pilot low-carbon provinces and cities, pilot carbon trading, and pilot low-carbon industrial parks. It gives full play to the synergy between administrative regulations and market mechanisms, and explores establishing a long-term mechanism for low-carbon development. Back in 2017, China’s research group on the implementation path to achieve carbon peaking as soon as possible proposed that China meets the objective conditions for carbon peaking ahead of schedule, both economically and technically. Despite some remaining difficulties, China’s goal of achieving net zero carbon emissions by 2050 is still technically and economically achievable, and the economic impact on national development and residents’ living standards is limited. As the world’s second-largest economy and the largest developing country, China is still in the mid-to-late stage of industrialization and urbanization, and its total energy demand will keep increasing within a certain period. Many developed countries have decoupled carbon emissions from the economy, and carbon peaking is a natural process of technological and economic development for them. Developed countries have a transition period of 60 to 70 years from carbon peaking to carbon neutrality. In comparison, China puts pressure on itself to achieve carbon peaking and carbon neutrality, striving to meet the “dual carbon” goal through policy means. China has only about 30 years to advance from carbon peaking to carbon neutrality. This means that the difficulty and intensity of GHG emissions reduction are far greater in China than in developed countries. It also means that China cannot mechanically copy the experience of other countries and regions, but can only “cross the river by feeling the stones” and learn by doing in its efforts to achieve carbon peaking and carbon neutrality. Difference indicates uniqueness. China’s practice of carbon peaking and carbon neutrality is a case of “using Chinese theory to interpret Chinese practice”. China will achieve carbon peaking in the face of imbalances and inadequacies in development, and move from carbon peaking to carbon neutrality in the shortest possible time. This will be an acid test for China. To this end, we must consistently promote carbon emissions reduction and economic and social development in parallel, attach greater importance to the development of the green energy industry, move faster to embrace low-carbon ways of work and life, and conduct carbon peaking campaign.

3.2 Top-Level Plan for Carbon Peaking and Carbon Neutrality Carbon peaking and carbon neutrality must be achieved under a coordinated national response by giving play to institutional and market strengths, and implementing a package of matching policies. To achieve carbon peaking and carbon neutrality, we must take differentiated action plans and integrate factor endowments in the eastern, central, and western regions. In addition to the traditional practice of assigning emissions reduction targets to local government departments, it is also necessary to make

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enterprises bear responsibilities for emissions reduction through policies such as carbon pricing, and to provide policy support in terms of science and technology, carbon sinks, and international cooperation. The Office of the Leading Group for carbon peaking and Carbon Neutrality is based at the National Development and Reform Commission. According to unified plans, it is moving faster to establish a “1 + N” policy system for carbon peaking and carbon neutrality. In fact, many of China’s reform programs have been launched in the form of “1 + N”, such as programs for state-owned enterprise reform and the construction of an ecological civilization system. This is a customary way for China to make major decisions. The “1” refers to the overall guiding opinion, and the “N” refers to supporting policies in multiple fields and respects. On October 24, 2021, the CPC Central Committee and the State Council jointly issued the Working Guidance for carbon peaking and Carbon Neutrality in Full and Faithful Implementation of the New Development Philosophy (hereinafter referred to as the Guidance). On October 26, 2021, the State Council issued the Action Plan for carbon peaking Before 2030 (hereinafter referred to as the Plan), which coordinates the work on carbon peaking and carbon neutrality. As the “1” in the “1 + N” practice, the Guidance is the systematic and overall plan made by the CPC Central Committee for the work on carbon peaking and carbon neutrality. Covering the stages of carbon peaking and carbon neutrality, it is a top-level plan for governing the overall situation and longterm goals. The Plan is the principal policy document for the “N”. As the master plan for the carbon peaking stage, it is effectively aligned with the Guidance in terms of objectives, principles, direction, etc., with a greater emphasis on achieving carbon peaking targets before 2030. Moreover, the “N” also includes measures on scientific and technological support, carbon sink capacity, statistical accounting, inspection and assessment, as well as guarantee policies on fiscal, financial, price and other issues. These documents form the “1 + N” policy system with clearly defined goals, rational division of labor, effective measures, and effective alignment for carbon peaking and carbon neutrality. The “1 + N” policies involve many fields such as energy, industry, transportation, and technology. These are characterized by transformation and innovation. Policies primarily include the following 10 spheres: First, promote the all-round green transformation of economic and social development. Second, deeply adjust industrial structure. Third, move faster to build an energy sector that is clean, low-carbon, safe and efficient. Fourth, move faster to build a low-carbon transportation system. Fifth, improve the quality of green, low-carbon urban and rural construction. Sixth, make major breakthroughs in green and low-carbon technology and promote its application. Seventh, continuously consolidate and enhance the capacity for carbon sinks. Eighth, improve green and low-carbon development in opening up. Ninth, improve the standards of laws and regulations as well as the statistical monitoring system. Tenth, improve the policy mechanism.

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3.3 Avoid Campaign-Style “Carbon Reduction” Due to local governments’ misinterpretation of issues such as atmospheric governance and carbon dioxide emissions reduction, the path to carbon dioxide emissions reduction also “went astray”, resulting in non-observance of economic laws, blind action, and imbalance among the economy, people’s livelihood and carbon reduction. On July 30, 2021, it was pointed out at the meeting of the Political Bureau of the CPC Central Committee that we shall take coordinated and orderly steps to promote carbon peaking and carbon neutrality, make a nationwide response, say no to campaign-style “carbon reduction”, establish the new before abolishing the old, and resolutely curb the unregulated development of energy-intensive projects with high emissions. In general, campaign-style “carbon reduction” is manifested in the following three ways. First, frenzied crowd action and empty slogans. At present, some local governments and departments mouth the goal of carbon peaking and carbon neutrality ahead of schedule without conducting sufficient investigation, or even formulating action plans and coordinating energy security and economic efficiency, for the purpose of seizing opportunity and jumping on the bandwagon. However, their follow-up action has petered out. It is not advisable to regard carbon peaking and carbon neutrality as a publicity stunt. Carbon peaking and carbon neutrality are by no means a feeding frenzy for capital. The realization of the “dual carbon” goals hinges on taking concrete, down-to-earth actions rather than empty slogans or bluff. If an action plan is not scientific and operable, government statements will not only affect the realization of the “dual carbon” goals, but also have an adverse impact on economic growth, employment, social welfare, and so on. Second, abolish the old before establishing the new, and go overboard. This kind of campaign-style “carbon reduction” plan adopts radical measures to achieve energy conservation and emissions reduction targets, or shut down or launch projects in a campaign-style manner. Some local governments implement power rationing, and adopt a “one-size-fits-all” approach to all coal-fired power units without regard to energy demand and security. Some local governments simply emphasize controlling total energy consumption and achieving carbon peaking ahead of schedule by rampantly shutting down some energy-intensive traditional industries without considering economic development. Some regions rashly launch new energy projects, such as clearing forests to build photovoltaic power plants and rushing to build wind power farms. It is also widely believed that every region, every industry, and every enterprise should achieve carbon peaking and carbon neutrality. Such excessive practices that violate the objective laws of economic development not only make it difficult to optimize the carbon reduction cost and benefits, but also waste resources, impact the stable economic recovery and destabilize the industrial chain. Third, blindly rush to achieve carbon peaking. In some regions, the connotation of carbon peaking is misinterpreted as carbon peaking by continuing to sharply increase fossil energy consumption by 2030. There is a strong urge to develop energyintensive industries. Recently, the central leading group for the inspection work of

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ecological and environmental protection found that there was an impulse to rashly launch energy-intensive projects with high emissions on a large scale in some regions. If energy-intensive projects with high emissions were not regulated, it would not only affect China’s industrial structure upgrading as well as the adjustment of the energy structure, and worsen ambient air quality, but also prompt carbon dioxide emissions, which indicates greater pressure and higher cost of achieving carbon neutrality. Campaign-style “carbon reduction” is a campaign targeted at carbon reduction, and is a manifestation of superficial carbon emissions reduction. It has “excessive” and “inadequate” characteristics. Essentially, campaign-style “carbon reduction” is a problem of lack of coordination and disorderly preemptive action. The reasons can be boiled down to three respects: First, lack of systematic thinking. Local governments fail to see the relationship between carbon reduction and development, between carbon reduction and energy, as well as among energy accessibility, cost-effectiveness and low carbon. Second, “dual carbon”-driven view on cadres’ performance. Local governments lack a thorough understanding of policies on carbon peaking and carbon neutrality, and resort to simplified and inconsiderate means, which cause an unnecessary adverse impact on economic and social activities. Third, the role of the market mechanism is not brought into play. To promote the alignment and realization of the “dual carbon” goals, governments and markets undoubtedly must perform their respective roles. If the institutional mechanism is not adjusted accordingly, policies and markets cannot influence and balance each other, and the ultimate market performance will be hardly satisfactory. In order to avoid the adverse impact of campaign-style “carbon reduction” and save the costs of trial and error, it is necessary to strike a balance between development and emissions reduction, between overall and local imperatives, and between shortterm and longer-term considerations in terms of working ideas. In terms of measures, it is necessary to stick to and strengthen the national overall top-level plan, leverage institutional strengths, ensure the fulfillment of responsibilities by all parties, insist on the combined actions of the government and the market, and facilitate implementation through reform and innovation. The first is to uphold the principle of “establishing the new before abolishing the old.” We should balance reform, development and stability, build infrastructure for carbon reduction, and reduce carbon emissions on the premise of ensuring stable economic performance. We must make sure of establishing the new before abolishing the old. At the institutional level, specific and unified standards as well as action guidelines are needed for the orderly progress in carbon peaking and carbon neutrality. Top-level plans guide local governments to keep a scientific pace of carbon emissions reduction. At the industrial level, it is necessary to build an energy and electric power system featuring renewable energy, compel industrial transformation and upgrading through carbon emissions reduction, and ensure its realization with technological innovation. Moreover, we must ensure projects for economic development, urban construction, environmental protection, and people’s better living standards, and resolutely curb the unregulated development of energy-intensive projects with high emissions. At the public level, we should advocate a green and low-carbon way

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of life, and compel the supply-side green and low-carbon transformation through the demand side. The second is to take coordinated and well-ordered steps for “dual carbon” goals in accordance with laws and regulations. Coordinated and well-ordered steps are the two guiding principles for achieving carbon peaking and carbon neutrality. “Coordination” refers to a nationwide response and respect for the resource endowment, economic development goals and comparative advantages of various regions. We should promote the deep integration of resources in eastern, central and western China. Regions where conditions permit should take the lead in achieving carbon peaking, carbon neutrality, and even negative emissions, so as to offset the carbon emissions reduction results of other regions which prioritize economic development and have little potential for carbon emissions reduction. We must resolutely curb the conduct of only caring about the immediate cadre performance and benefits without regard to the level of economic development and its carrying capacity. “Well-ordered steps” refer to scientific emissions reduction policies that are neither rash nor conservative. It is targeted and orderly control in light of local conditions. It is necessary to rationalize the supply and demand relationship for steel and coal, and clarify the role of energy-intensive projects with high emissions in the process of decoupling economic development from energy demand. While conforming to the objective laws of economic development, we must earnestly avoid worsening overcapacity, and develop renewable energy- based electricity and high-tech industries in a timely and appropriate manner. The third is to balance the relationship between administrative measures and market mechanisms. To help realize the “dual carbon” goals, it is necessary to say no to oversimplified and rough administrative measures just to achieve the goals, which may have an unnecessary adverse impact on economic and social activities. In this process, the government needs to organize all relevant policies and systems, improve the existing policies and systems in light of the “dual carbon” goals, and align government policies and systems with carbon reduction goals. In this way, market players will take the initiative to promote the realization of the “dual carbon” goals.

4 International Synergy for Carbon Peaking and Carbon Neutrality The government’s response to the issue of climate change is a crucial issue in the twenty-first century. China’s vision of the “dual carbon” goals sends a message to the world of stepping up efforts to address climate change. However, when it comes to the challenge of climate change, the single-handed effort is far from enough. International cooperation within the framework of multilateralism is urgently needed to tackle climate issues.

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4.1 China, the United States and European Union Lead the New Pattern of Global Climate Governance Achieving global carbon neutrality calls for the cooperation and firm leadership of China, the United States and Europe. In 2020, China, the United States and Europe accounted for upwards of 50% of the world’s GHG emissions. The Royal Institute of International Affairs believes that the decisions made by China, the United States and Europe have a significant influence on the global climate and energy security. Policies for reducing GHG emissions tend to be long-term and must be coherent and stable. The U.S. capricious approach to climate change and the repeated “stop-andgo” climate change policy of the United States have seriously weakened its efficiency in the international emissions reduction process. The EU has consistently supported climate initiatives, and set more ambitious emissions reduction targets. It is a global leader in the use of low-carbon technologies. China steadfastly practices the philosophy of multilateralism and is tackling climate change with great determination and practical action. At the Leaders Summit on Climate held on April 22, 2021, Chinese President Xi Jinping put forward the Chinese approach of “staying committed to the harmonious coexistence between man and nature”, “staying committed to green development”, “staying committed to systematic governance”, “staying committed to being human-centered”, “staying committed to multilateralism” and “staying committed to the principle of common but differentiated responsibilities”4 in accordance with China’s independent emissions reduction practice. It not only points out the way forward for China’s participation in international climate governance, but also provides solutions for fostering countries’ cooperation and participation in global climate governance. China–U.S. cooperation in tackling global climate change issues is a confidence booster for the global response to climate change. The Biden administration signed an instrument to bring the United States back into the Paris Agreement, which is significant good news for the global energy transition and the renewable energy industry. It is also in line with the concept of building a community with a shared future for mankind as advocated by China, and China affirmed this practice. With the new U.S. administration as an opportunity, the Chinese government should foster China– U.S. cooperation and technical exchanges regarding clean energy, jointly promote the implementation of Paris Agreement-related mechanisms, ensure openness and transparency, and conduct more communication. China and the United States should launch the fourth joint statement on climate change at the appropriate time, clarify the development strategy of low GHG emissions by the mid-twenti-first century, actively honor the commitments to green development, and boost global confidence in green development.

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“Xi Jinping Attends the Leaders Summit on Climate and Delivers Important Speech, Stressing the Need to Pursue Green Development, Multilateralism, and the Principle of Common but Differentiated Responsibilities, and Jointly Foster a Community of Life for Man and Nature”, People’s Daily, April 23, 2021.

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We should foster China–EU cooperation in the field of climate and achieve win– win outcomes in tackling climate change. The EU has set high green development targets for both climate change and biodiversity. However, it is unlikely for the EU to bring about a substantial change in the global climate change issue single-handedly. It needs China as its partner in the response to climate change. China and the EU need to promote dialogue, strike a balance between the ideal and reality, and help each other achieve their respective goals. The Chinese Government should make good use of the High-Level Environment and Climate Dialogue (HECD) between China and the EU. China and the EU should support each other in hosting the international conference on biodiversity, climate change and nature conservation, and fulfill the necessary substantive commitments made in the China–EU Investment Agreement concerning market access, a level playing field and sustainable development.

4.2 China Observes the International Consensus on “Coal’s Phase Down” The trend of green development in the context of global cooperation poses challenges to sustainable coal development and utilization. UN Secretary-General António Guterres called on OECD member states to promise to stop using coal by 2030 and non-OECD countries to promise to stop using coal by 2040; cease international funding for coal-fired power plants and shift investment to sustainable energy projects. We should make a global effort to transform coal-fired power plants one by one, and achieve a just transition. The global roadmap for carbon peaking and carbon neutrality is crystal-clear: coal must be phased down first, and the sooner the better. Carbon neutrality in developed countries is basically targeted at carbon dioxide emissions from fossil energy consumption. The United States focuses on fossil fuels in its control of GHG emissions. The UK will shut down all coal power plants by 2025. Germany initially said it would completely phase out coal use by 2042, and then revised the year as 2038. It now promises to achieve this by 2030. Therefore, China’s carbon neutrality strategy must be in line with international rules based on international consensus, coordination, and recognition. The focus should be on fossil energy-based carbon emissions reduction and decarbonization. Pan Jiahua, a member of the Chinese Academy of Social Sciences, pointed out that coal should be completely phased out by 2045 or at the latest by 2050. De-coaling is an international trend and consensus that China must conform to. In recent years, China has become the principal investor in overseas coal-fired power, funding for the construction of 70% of the world’s coal-fired power plants through the Belt and Road Initiative. Coal-fired units exported by China are technically state-ofthe-art, and their pollutant emissions are close to the emission level of gas-powered units. Moreover, its electricity transmission technologies such as Ultra-High Voltage (UHV) are the world’s most advanced and therefore environmentally friendly and

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efficient. Nevertheless, some have questioned that it runs counter to China’s proactive response to climate change and green transition. Since, if external conditions are not considered, coal is the cheapest energy resource, the development of coal-fired power is an inevitable choice for host countries to address the existing problem of energy poverty, which is an obstacle to development. China’s overseas investment in coalfired power depends more on the market mechanism and the recipients’ preferences, and is not a unilateral decision made by the Chinese government. Furthermore, many investments are not entirely made by government entities. Although the government guides the flow of social capital, market behavior plays a big role.5 Therefore, enterprises making overseas investments must fully familiarize themselves with local environmental protection policies. For example, thermal power projects must be handled prudently, and overseas investment projects must not run counter to climate governance. The focus and difficulty of corporate environmental responsibility are manifested in carbon-related corporate responsibility. The de-coaling process, if mishandled, may also lead to social conflicts and even political turmoil. From an investment perspective, coal mining, coal chemical engineering, and coal-fired power require investments of a long payback period, and the amount of investment often easily reaches seven or eight billion yuan or even tens of billions of yuan. Generally, such projects are not put into production until three years after investment. The economic operation cycle of such projects is up to forty or fifty years, whereas the rigid constraints of carbon neutrality will continue to tighten in twenty or thirty years. Therefore, enterprises face the potential risk of stranded assets. In addition, the World Resources Institute (WRI) estimates that by 2030, some six million jobs in coal power generation, oil exploration and other industries may disappear, while new jobs related to green development will require different skills. If the transition was not achieved in a fair and equitable manner, it would bring great difficulties to affected workers and communities.

4.3 Pros and Cons of Carbon Border Adjustment Mechanism (CBAM) The European Commission announced the European Green Deal in response to climate change in December 2019, whereby the European region will be the first to become carbon neutral in the world by 2050 and gradually roll out a slew of policies and measures. Of these measures, the one that attracts the most attention and controversy is none other than the Carbon Border Adjustment Mechanism (CBAM). From 2026, this mechanism will levy carbon tariffs on the imports of five types of products in the EU: cement, steel, aluminum, fertilizers and electricity. Although the EU has stressed again and again that the CBAM fully complies with the World Trade Organization (WTO) rules, doubts about its trade protection remain. 5

Zhang Zhongxiang (2021).

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On the one hand, Europe launches the CBAM to effectively limit “carbon leakage”.6 On the other hand, it is to keep EU-related industries competitive in the EU. Under the CBAM, energy-intensive products are at a competitive disadvantage in international trade. The CBAM tries to regulate the economic performance of other countries and compel the low-carbon transition of the economy and society. Taking additional unilateral measures such as CBAM outside the multilateral frameworks of the United Nations Framework Convention on Climate Change (UNFCCC) and the Paris Agreement brings a host of problems. The acceptance, severity and scope of influence of this policy depend on the formulation and implementation of the detailed CBAM-related rules. In fact, carbon prices mirror the local regions’ emissions reduction costs and potential to some extent. Different industries require different emissions reduction costs in different countries and regions because all countries have different national conditions and stages of development, and different levels of economy, energy structure and technology. It is reasonable that carbon prices in developing countries are lower than those in developed countries. The CBAM is suspected of compelling countries with different levels of development and capacity to adopt uniform carbon prices. Some also believe that the CBAM shows a tendency toward “anti-globalization” and trade protectionism, and may become a barrier to international trade. China takes a stance that the CBAM is essentially a unilateral measure, which unscrupulously extends the climate issue to the field of trade. Not only does this practice violate the WTO rules, impact the free and open multilateral trading system, and seriously undermine the mutual trust of the international community and the prospects for economic growth, but it also does not accord with the principles and requirements of the UNFCCC and the Paris Agreement, particularly the principles of common but differentiated responsibilities (CBDR) and the institutional arrangement of “bottomup” nationally determined contributions (NDCs). The CBAM will foster unilateralism and protectionism, and seriously dent the initiative and capacity of all parties to tackle climate change. Debating the pros and cons of the CBAM has become a current hot topic of climate. It is also a world consensus that unilateral measures must not go against the trend of global carbon neutrality. China conducts extensive consultations with the international community on the CBAM in a prudent but positive manner to avoid conflicts that may arise from the EU’s unilateral adoption of the CBAM. Tackling climate change is a global responsibility and issue. The CBAM also promotes China’s carbon-intensive enterprises involved in international trade, as well as related upstream and downstream industries. The response to the CBAM fundamentally lies in promoting the commercial promotion and application of the Chinese green and low-carbon technologies. China has officially launched the national carbon market on July 16, 2021, which is a way to implement the carbon pricing policy. China 6

“Carbon leakage” refers to the transfer of energy-intensive industries with high emissions in areas with strict environmental regulations to areas with loose environmental regulations, generally to developing countries and regions. Local environmental constraints are solved by importing highcarbon products from these countries and regions, but this will lead to a sharp rise in greenhouse gas emissions in areas with loose environmental regulations.

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and the EU are the main driving forces for tackling climate change. A joint effort to consolidate the trend of global carbon neutrality will be a win–win option. On the whole, carbon neutrality is a wide-ranging, profound social-economic change. Change is inevitably resisted by pressure, but pressure is often the driver for moving forward. In the face of changes of a magnitude unseen in a century, I believe that China is bound to stand out in the complex international competition, and achieve long-term quality development, as well as national rejuvenation. Zhuang Guiyang October 2021

References Pan Jiahua and Zhang Ying, “China’s Strategic Process and Role Transformation in Tackling Climate Change: From Preventing ‘Black Swan’ Disasters to Addressing the Risk of ‘Gray Rhino’”, China Population Resources and Environment, No. 10, 2018. Yuan Jiahai and Zhang Haonan, “Is Coal-Based Electricity Still a ‘Ballast Stone’ in Carbon Neutral Power Systems?”, China Energy News, August 1, 2021. Zhang Zhongxiang, “China and the World Under Emission Peak and Carbon Neutrality Goals: Green and Low-Carbon Transition, Green Finance, Carbon Market and Carbon Border Adjustment Mechanism”, People’s Forum and Academic Frontiers, July 2021 (II). Zhuang Guiyang, “Green and Low-Carbon Development Highlights China’s Responsibility”, Guangming Daily, January 25, 2021.

Chapter 2

The Proposal and Conceptual Connotations of Carbon Peaking and Carbon Neutrality Goals Chen Ying and Zhang Yongxiang

During the general debate of the 75th session of the UN General Assembly held on September 22, 2020, President Xi Jinping announced that China will scale up its Intended Nationally Determined Contributions, strive for carbon peaking by 2030, and achieve carbon neutrality by 2060. The Fifth Plenary Session of the 19th CPC Central Committee, the Central Economic Work Conference, the meeting of the central committee for deepening overall reform, the meeting of the Central Committee for Financial and Economic Affairs and the 2021 national “Two Sessions” made plans for the work on carbon peaking and carbon neutrality. In October 2021, the CPC Central Committee and the State Council officially issued the Working Guidance for Carbon Peaking and Carbon Neutrality in Full and Faithful Implementation of the New Development Philosophy, which made a top-level and systematic plan for achieving carbon peaking and carbon neutrality. The State Council issued the Action Plan for Carbon Peaking Before 2030, which made specific plans for the carbon peaking campaign. Various government organs have stepped up efforts to formulate action plans and related policies on carbon peaking. Unprecedented prominence is given to carbon peaking and carbon neutrality, with work in full swing in all respects.

C. Ying (B) Research Institute for Ecological Civilization, Chinese Academy of Social Sciences, Beijing, China e-mail: [email protected] Z. Yongxiang National Climate Center, China Meteorological Administration, Beijing, China © China Financial & Economic Publishing House 2023 G. Zhuang and H. Zhou (eds.), China’s Road to Carbon Peaking and Carbon Neutrality, https://doi.org/10.1007/978-981-99-3122-4_2

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1 The Proposal of Carbon Peaking and Carbon Neutrality Goals 1.1 The Conceptual Connotations of Carbon Peaking and Carbon Neutrality The “carbon” in carbon peaking refers to carbon dioxide (CO2 ), a colorless, odorless, non-flammable gas at room temperature. The human activities of burning fossil energy, developing industries, and changing land use for agriculture and forestry since the Industrial Revolution have emitted a wealth of carbon dioxide, which remain in the atmosphere. Carbon dioxide is the most significant greenhouse gas (GHG) causing climate change. In addition to carbon dioxide, other temperature-enhancing greenhouse gases include methane (CH4 ), nitrous oxide (N2 O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), sulfur hexafluoride (SF6 ), and so on. In order to tackle climate change and ensure the sustainable development of human society, efforts must be made to reduce GHG emissions. Carbon peaking is a process for different entities such as the world, countries, cities and enterprises in which carbon emission shifts from increase to stable decrease. Carbon neutrality refers to the state in which different entities such as the world, countries, cities, enterprises, and activities achieve a balance between anthropogenic carbon emission sources and anthropogenic carbon sinks through afforestation, carbon capture and storage (CCS) technologies, and so on within a period of time.

1.2 Misunderstandings and Clarifications There are extensive misunderstandings about the basic concepts and connotations of carbon peaking and carbon neutrality. Clarification is therefore needed.

1.2.1

Construe Carbon Peaking as an Extra Room for Carbon Emissions Before Peaking, and “Scale New Heights” in Carbon Emissions

Some regions and enterprises hold a misconception about the relationship between carbon peaking and carbon neutrality. They mistakenly think that projects with high energy consumption and high carbon emissions should be put into operation as soon as possible before carbon peaking because there will be no opportunity afterwards. carbon peaking is a specific short-term goal, while carbon neutrality is a mediumto long-term vision. The two complement each other. Achieving carbon peaking as early as possible and striving to “shave peak emissions” can ensure more space and flexibility for subsequent carbon neutrality goals. The later the time to achieving the

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carbon peaking and the higher the peak value, the greater the challenge and pressure to achieve the goal of carbon neutrality. While peaking carbon emissions can be realized with greater efforts under the existing policies, the existing technology and policy systems fall far short of meeting the goal of carbon neutrality because it calls for an across-the-board and profound transformation of the social and economic system.

1.2.2

Focus on “Neutrality” in Carbon Neutrality and Overestimate the Role of Carbon Sinks

China’s forest carbon sinks are estimated to contain 1.1 billion tons of carbon dioxide, accounting for only approximately 11% of China’s total annual carbon dioxide emissions. During the same period, carbon capture and storage (CCS) and carbon capture, utilization, and storage (CCUS) demonstration projects in operation in China can reduce the emissions of about hundreds of thousands of tons of carbon dioxide per year. Experts estimate that China may realize negative carbon emissions of about 1.5 billion tons through geoengineering technologies such as carbon sinks and carbon removal by around 2060, which fails miserably to achieve the goal of carbon neutrality. Therefore, carbon emissions reduction is a priority work for carbon peaking and carbon neutrality. The sinks mentioned in carbon neutrality targets include only carbon sinks that are added by human activities such as afforestation and forest management, rather than natural carbon sinks or the stocks of carbon sinks. The absorption of carbon dioxide by the oceans constantly acidifies the oceans, causing an adverse impact on marine ecosystems. Carbon dioxide naturally absorbed by terrestrial ecosystems is carbon neutral, and these are not permanent carbon sinks. Forests absorb carbon during the growth period, but their absorption capacity decreases upon maturity. Moreover, carbon dioxide will be re-emitted into the air after flora and fauna die and rot. A forest fire may also turn the carbon stored in the forest into carbon dioxide which is then rapidly released. Therefore, carbon dioxide emitted into the atmosphere due to anthropogenic activities must be removed by artificially increased carbon sinks to achieve carbon neutrality.

1.2.3

Engage in Campaign-Style “Carbon Reduction” for Carbon Peaking and Carbon Neutrality

For campaign-style “carbon reduction”, some regions and enterprises mouth slogans, carry out blind activities in droves, and jump on the bandwagon without figuring out the conceptual connotations of carbon peaking and carbon neutrality. Other regions and enterprises set unrealistic goals out of sync with the current stage of development, or take unrealistic action just for carbon emissions reduction, such as building zero-carbon power systems. Promoting the transformation of the energy system is critical for achieving carbon peaking and carbon neutrality, but it must advance in

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a coordinated and orderly manner. If we rashly shut down coal power plants and rush headlong to develop renewable energy, it may destabilize the power grid and endanger the power supply system. For example, forests are built in places unsuitable for afforestation in order to increase carbon sinks. As a consequence, this will not increase carbon sinks, but will even wreck natural ecosystems.

1.2.4

Construe Carbon Neutrality as a Simple Control of Carbon Dioxide Emissions But Ignore Non-CO2 Greenhouse Gases

Greenhouse gases include methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons and sulfur hexafluoride in addition to carbon dioxide. Methane is about 21 times more powerful at warming the atmosphere than carbon dioxide. Xie Zhenhua, China’s Special Envoy on Climate Change, clarified for the first time that the goal of carbon neutrality by 2060 includes the emission of greenhouse gas in all economic spheres in the speech entitled “Global Green Recovery and ESG Investment Opportunities” delivered at Global Asset Management Forum 2021 Beijing Summit on July 24, 2021. The reduction of emissions of non-CO2 greenhouse gases is also an important component of the work on carbon peaking and carbon neutrality. The Kigali Amendment to the Montreal Protocol, approved by 197 parties to the Montreal Protocol on October 15, 2016, contains consensus on reducing emissions of HFCs, a potent greenhouse gas that contributes to global warming. China is a large producer and consumer of HFCs, and the demand for HFCs for refrigeration is growing fast. The reduction of HFCs is closely associated with mitigating and adapting to climate change. According to the Kigali Amendment, China will freeze the production and consumption of HFCs at the base level in 2024, cut it by 10% from the baseline level by 2029, and cut it by 80% by 2045. China has accepted the Kigali Amendment and promised to tighten the control of non-CO2 greenhouse gases, which is tantamount to stepping up efforts to tackle climate change.

1.3 Evolution of China’s Energy Conservation and Emission Reduction Targets1 China has always attached great importance to the issue of climate change. Active response to climate change is regarded as a major strategy for national economic and social development. Beginning with the Eleventh Five-Year Plan, each five-year plan contains goals for tackling climate change, and the State Council formulates and implements an across-the-board work plan for energy conservation and emission reduction.

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Chen Ying and Chao Qingchen (2021).

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Energy Intensity Targets in the Eleventh Five-Year Plan (2006–2010) and Its Achievements

The concept of energy conservation and emission reduction was advanced for the first time in the Eleventh Five-Year Plan, which set the obligatory target of reducing energy consumption per unit of GDP by about 20% compared with the end of the Tenth Five-Year Plan period. During the Eleventh Five-Year Plan period, the energy consumption per unit of GDP of the country decreased by 19.1%, which basically met the goals and tasks set in the outline of the Eleventh Five-Year Plan.

1.3.2

Energy Intensity Targets in the 12th Five-Year Plan (2011–2015) and Its Achievements

The 12th Five-Year Plan set the goals for increasing low-carbon energy utilization and cutting fossil energy consumption, with non-fossil energy accounting for 11.4% of primary energy consumption. Energy consumption per unit of GDP would be 16% lower than that in 2010, and carbon dioxide emissions per unit of GDP would be 17% lower than that in 2010. The forest cover would reach 21.66%, and the forest stock volume would reach 600 million cubic meters. During the Twelfth Five-Year Plan period, China cumulatively reduced carbon intensity by about 20%. The nonfossil energy accounted for 12% of primary energy consumption in 2015. These all outperformed the targets set in the 12th Five-Year Plan. Moreover, the installed capacity of renewable energy accounted for a quarter of the world’s total, and the new installed capacity of renewable energy accounted for one-third of the world’s total, all of which contributed to the global response to climate change.

1.3.3

Targets for Controlling Total Energy Consumption and Energy Intensity in the 13th Five-Year Plan (2016–2020) and Its Achievements

The Comprehensive Work Plan for Energy Conservation and Emission Reduction During the 13th Five-Year Plan Period set dual control targets: by 2020, the national energy consumption per 10,000 yuan of GDP would be reduced by 15% compared with that in 2015, and the total energy consumption would be controlled within five billion tons of standard coal. According to the data released by the Department of Energy Statistics of the National Bureau of Statistics, the total energy consumption in 2020 reached about 4.97 billion tons of standard coal, which met the goal of “controlling the total energy consumption within five billion tons of standard coal” set in the outline of the 13th Five-Year Plan. However, the cumulative decline in energy intensity was about 13.79%, failing to meet the goal of “reducing energy consumption per unit of GDP by 15% compared with 2015” as set in the outline of the 13th Five-Year Plan. Carbon dioxide emissions per unit of GDP were cut by about 22%, exceeding the target of 18% as set in the 13th Five-Year Plan.

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China proposed at the Copenhagen Climate Change Conference in 2009 that by 2020, non-fossil energy would account for about 15% of primary energy consumption in China; the forest area would increase by 40 million hectares compared with 2005, and the forest stock volume would increase by 1.3 billion cubic meters compared with 2005 as a result of afforestation and better forest management. In fact, by the end of 2020, China’s carbon intensity had been cut by about 48.4% compared with 2005, non-fossil energy accounted for 15.5%, China ranked first in the world for many consecutive years in terms of the number of renewable energy patents, investment, installed capacity and generating capacity, and China’s installed capacity of wind power and photovoltaic power accounted for over 30% of the world’s total. Globally, China sees the fastest growth in forests as carbon sinks. At the same time, all rural residents living below the current poverty line in China have been lifted out of poverty. China has basically achieved coordination among economic and social development, environmental protection and climate action. Not only has China achieved the target of honoring commitments for 2020 ahead of schedule, but it has also laid the groundwork for the implementation of the Intended Nationally Determined Contributions by 2030.

1.3.4

The 14th Five-Year Plan Period Is a Critical Period and Window Period for Carbon Peaking and Carbon Neutrality

President Xi Jinping said at the Climate Ambition Summit 2020 that by 2030, China will lower its carbon dioxide emissions per unit of GDP by over 65% from the 2005 level, increase the share of non-fossil fuels in primary energy consumption to around 25%, increase the forest stock volume by six billion cubic meters from the 2005 level, and bring its total installed capacity of wind and solar power to over 1.2 billion kilowatts.2 The 14th Five-Year Plan set obligatory targets for tackling climate change, including: reducing energy consumption per unit of GDP by 13.5%, reducing carbon dioxide emissions per unit of GDP by 18%, and increasing the forest cover to 24.1%. 2021 is the first year for the implementation of the 14th Five-Year Plan. Further clarifying the path to carbon peaking and related policies will be crucial to ensuring quality carbon peaking by 2030 and laying the foundation for achieving carbon neutrality by 2060. Overall, China’s climate change targets mirror the shift from relative targets (energy and carbon intensity targets) to absolute targets (carbon peaking and carbon neutrality) through the transitional targets of controlling energy intensity and total amount. The control model is being upgraded, and the scope of control extends from fossil energy consumption to all spheres including non-fossil energy development, forests as carbon sinks, as well as industry and regional adaptation to climate change. The work of response to climate change is advancing at the national and local levels, and remarkable results have been made. 2

“Xi Jinping’s Important Speech at Climate Ambition Summit”, People’s Daily, December 13, 2020.

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2 Scientific Basis for Carbon Peaking and Carbon Neutrality Goals A thorough understanding of the “dual carbon” goals requires a knowledge of the scientific issues of climate change.

2.1 What Is Climate and Climate Change Climate refers to the meteorological conditions that characteristically prevail or are the statistical weather conditions in a particular region over a given period of time. It reflects the basic characteristics of a region such as coldness, warmth, dryness and wetness. It is the result of the mutual interaction of the atmosphere, hydrosphere, lithosphere, biosphere and others, and is shaped by the comprehensive action of atmospheric circulation, latitude, altitude and surface configuration. Climate change refers to statistically significant changes in climatological normals and the value of climate extremes. The rise and fall of the normals indicate the changes in the average climate state. An increase in the value of climate extremes indicates higher instability of the climate state and more obvious climate anomaly. Climate change as defined by the IPCC refers to climatic fluctuations based on natural change and human activities, while UNFCCC defines climate change as a change of climate attributed directly or indirectly to human activities that alter the composition of the global atmosphere except natural climate variability observed over comparable time periods. Climate change is a concept closely associated with timescales. The content, manifestations and main driving factors of climate change are different on different timescales. According to the different timescales and influencing factors of climate change, the climate change issue can generally be divided into three categories: climate change in geological periods, climate change in historical periods and climate change in modern periods. Climate change on a timescale of over 10000 years is the climate change in geological periods, such as glacial periods and interglacial cycles. Climate change that began since the emergence of human civilization (within 10,000 years) can be included in the scope of climate change in historical periods. Climate change since 1850 when the global instruments were used to record climate change is generally regarded as climate change in modern periods.

2.2 Characteristics of Climate Change in the Past Century The past century has witnessed systemic changes in the global climate characterized by warming. The average concentrations of carbon dioxide, methane and nitrous oxide in the global atmosphere in 2019 were (410.5 ± 0.2) ppm, (1877 ± 2) ppb

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and (332.0 ± 0.1) ppb, respectively, up by 48%, 160% and 23% from pre-industrial (1750) levels, hitting all-time highs in the past 800,000 years. The effective radiative forcing (ERF) caused by the increase in major GHGs in the atmosphere in 2019 reached 3.14 watts per square meter, which is obviously higher than the radiative forcing caused by natural factors such as solar activities and volcanic eruptions, and is the most significant influencing factor of global warming. The year 2020 saw an upward trend of global climate warming, with the global mean temperature higher than the pre-industrial level (average of the 1850–1900 period) by about 1.2°C, becoming the second warmest year since the complete meteorological observation record began. The average global sea surface temperature has risen by 0.89°C (ranging from 0.80°C to 0.96°C), and the global ocean heat content has continued to grow in the past 100 years, with a significant acceleration after the 1990s. The global average rate of sea-level rise was 3.2 mm per year from 1993 to 2019; the Arctic Sea ice range exhibited a trend of significant contraction from 1979 to 2019, with the September sea-ice extent declining by an average of 12.9% per decade. The global mountain glacier substance lost at a rate of (123 ± 24) billion tons per year from 2006 to 2015, and the substance losses increased by about 30% compared with the 1986–2005 period. In the context of global warming, China’s surface temperature has exhibited a significant upward trend in the past century, increasing at a rate of (1.56 ± 0.20)°C per 100 years, which is significantly higher than the global average terrestrial warming rate of 1.0°C per 100 years. From 1951 to 2019, the regional average temperature rise rate in China was approximately 0.24°C per decade, with a significantly higher warming rate in the north than in the south, and a greater warming trend in winter and spring than in summer and autumn. From 1961 to 2019, China saw large interannual fluctuations in average annual precipitation, with a significant upward trend of annual precipitation in northeast China, northwest China, most of Tibet and some parts of southeast China. The annual precipitation showed a downward trend from the south of northeast China and parts of north China to most of southwest China.

2.3 Human Activities Are the Principal Cause of Climate Change in the Past Century The causes of changes in the climate system fall into two categories: natural factors and anthropogenic factors. The former include changes in solar activity, volcanic activity, internal variability of the climate system, etc., whereas the latter includes increases in atmospheric GHG concentrations caused by the human activities of burning fossil fuels and deforestation, changes in atmospheric aerosol concentrations, changes in land use and land cover, and so on. The carbon dioxide emitted as a result of the extensive use of fossil energy such as coal and oil since industrialization has contributed to the increasing concentration of atmospheric carbon dioxide. The greenhouse effect of GHG such as carbon dioxide

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has resulted in climate warming. The greenhouse effect theory has been verified by a wealth of scientific theories and simulation experiments. Only by considering the role of human activities can we simulate the trend of global warming in the past century. Only by considering the impact of human activities on changes in the climate system can we explain changes in the atmosphere, oceans, cryosphere as well as extreme weather and climate events. Human-induced GHG emissions, as abundant observations and studies have proven, are the principal cause of changes in global temperature extreme events and may also be the primary cause of aggravating heavy precipitation on land worldwide. More evidences reveal the impact of human activities on changes in extreme precipitation, drought, tropical cyclones, and so on. Furthermore, on the regional scale, human activities such as changes in land use and land cover or changes in aerosol concentrations can also impact changes in temperature extreme events. Urbanization may contribute to warming urban areas.

2.4 The Urgency of Global Climate Change Climate change exerts a wide-ranging and profound impact on nature as well as the sustainable development of human society and the economy. In the context of global climate change, extreme weather and climate events occur frequently around the world. For example, in late June 2021, temperatures in the northwestern United States hit record-breaking triple digits (Fahrenheit), while the western region was hard hit by severe droughts and wildfires, which claimed the lives of hundreds of people and affected nine million people. It raised the local maximum temperature record by nine degrees Fahrenheit. After analyzing the high-temperature incident, researchers at the World Weather Attribution (WWA) believed that this could be a milestone in the escalation of climate crises, a weather event that was statistically impossible before human-induced climate change. In another example, persistent heavy rainfall occurred in Henan Province, China from July 17 to 20, 2021. This heavy rainfall process showed five characteristics: long duration, large cumulative rainfall, wide range of heavy rainfall, concentrated period of heavy rainfall and extreme nature. The maximum hourly rainfall reached 201.9 mm, smashing the record in mainland China (the maximum hourly rainfall of Penghu in Taiwan, China reached 214.8 mm on July 6, 1974). The three-day rainfall reached 617.1 mm, approaching the previous multi-year average annual rainfall of 640.8 mm. According to preliminary analysis, it was a once-in-a-millennium rainfall in terms of hourly rainfall, the probability of daily rainfall, and the recurrence interval. This extraordinary rainstorm in Zhengzhou left 51 people dead, and caused about 100,000 people to be evacuated, with colossal economic losses. China is a region sensitive to and significantly impacted by global climate change. Since the 1950s, China’s temperature rise has been significantly larger than the global average. Extreme weather and climate events in China become increasingly frequent, and the extremely high temperature events, floods, urban inland inundation, typhoons, droughts, etc. have increased, resulting in increasing economic losses. The

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direct economic losses caused by extreme weather and climate disasters in China soared from an average of 120.8 billion yuan per year before 2000 to an annual average of 290.8 billion yuan after 2000, an increase of 1.4 times. Climate change gives rise to severe water resource problems in China. The runoff of major rivers in east China has decreased, the runoff of the Haihe River and the Yellow River has plunged by upwards of 50%, and the shortage of water resources in north China has been exacerbated. Due to water shortage, more arable land is being affected by drought. Climate change has impacted the structure, functions and services of China’s ecosystem to varying degrees. Climate change coupled with natural disturbances and human activities has reduced biodiversity, made the ecosystem more unstable and vulnerable, destabilized agricultural production, increased its costs, and reduced agricultural quality. Moreover, rising sea levels exacerbate coastal erosion, seawater (tidal saltwater) invasion as well as soil salinization. High sea levels coupled with typhoons and storm surge play havoc with coastal urban development. Extreme weather and climate events also exert a significantly adverse impact on infrastructure and major engineering operations. If human beings do not control greenhouse gases emitted by them, the Earth will get warmer and as a result suffer in all respects. Scientists predict that by the end of the twenty-first century, the global average temperature will rise by about 4°C from pre-industrial levels, and temperature rise may be even far higher in polar regions, possibly with the Arctic free from sea ice in September. A temperature rise of 4°C will cause sea levels to rise by 0.5 to 1 m, followed by several meters of rise over the next few centuries. An increase in the carbon dioxide concentration in the atmosphere will acidify the oceans. A temperature rise of 4°C or more by 2100 is equivalent to a 150% increase in ocean acidification. Ocean acidification, climate warming, overfishing and habitat destruction will adversely impact marine life and ecosystems. Climate change will heighten the risks of droughts, forest fires, etc., and play havoc with water supply and agricultural production. In the future, the world’s arid areas will become drier while the humid areas will become wetter. Extreme droughts may occur in the Amazon, Western Americas, the Mediterranean, southern Africa and southern Australia. Climate change may cause economic losses in many regions in the future, and some species will reach extinction faster. Climate change is also closely associated with human health. Its impact is manifested in at least four ways: First, extreme weather. Climate change has led to more extreme weather, and more violent floods, storms, and forest fires around the world, thus contaminating water, damaging houses, infrastructure and other property, and directly endangering human health and lives. Second, air pollution. The increase in forest fires caused by climate change exacerbates local air pollution, which triggers heart and respiratory diseases as well as allergic reactions. Climate change is correlated with urban smog in a complicated way, and may contribute to urban pollution. Third, infectious diseases. Floods and storms caused by climate change promote the prevalence of infectious diseases. The melting permafrost may also potentially bring ancient viruses back to light. Fourth, high temperature and heatwave. The scorching heat caused by climate change, coupled with the urban heat island effect, can induce

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dehydration and heat stroke, particularly posing threats to the elderly and children, as well as to the poor. Moreover, the increase in GHG emissions, the cumulative impact of climate change, and the complex correlation between economic and social systems heighten systemic climate risks. Systemic climate risk may be triggered by certain direct risks or caused by the concurrence of a host of risks. Owing to the dynamic linkage among risks, small and medium-sized direct risks often evolve into large-scale systemic risks. The chain reaction is a basic feature of systemic risks. Because systemic risks have a complex internal linkage and may cause a wide-ranging impact, it will cross critical points, often irreversibly, if it occurs. In 2018, the IPCC Special Report on Global Warming of 1.5°C compared the different impacts of global warming under the scenarios of temperature rise of 2°C and 1.5°C. According to the conclusions of the assessment report, in order to meet the 2°C target under the Paris Agreement, it is necessary to reduce global carbon emissions by 25% by 2030 from the 2010 level and achieve carbon neutrality by around 2070. The 1.5°C target requires a global carbon emission reduction of 45% by 2030 from the 2010 level and the realization of carbon neutrality by around 2050. In any case, global carbon emissions should peak as early as possible during the 2020–2030 period.

3 The Main Experiences and Practices of Developed Countries in Carbon Peaking and Carbon Neutrality Most developed countries have peaked carbon dioxide emissions, with a downward trend in carbon emissions. Based on the data on carbon dioxide emissions in various countries and regions from 1750 to 2019, the trend of CO2 emissions in countries and regions above the World Bank’s standards for high-income countries is analyzed as below. By the end of 2019, a total of 46 countries and regions—mainly developed countries—around the world had achieved carbon peaking. These fall into two categories: natural carbon peaking and climate policy-driven carbon peaking. It began with the international climate negotiations in 1990. Emissions peak before that belongs to natural peaking, such as Sweden in 1970, Britain in 1971, Switzerland in 1973, and Belgium, France, Germany, and the Netherlands in 1979. In 1992, the United Nations Framework Convention on Climate Change (UNFCCC) was signed at the United Nations Conference on Environment and Development (UNCED). The Kyoto Protocol adopted in 1997 set quantitative emission reduction targets for developed countries for the first time. Increasingly stringent climate policies promoted carbon peaking in developed countries, such as Portugal in 2002, Finland in 2003, Spain, Italy, Austria, Ireland, and the United States in 2005, Greece, Norway, Croatia, and Canada in 2007, New Zealand, Iceland, and Slovenia in 2008, and Japan in 2013.

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Carbon peaking in developed countries is closely associated with the process of industrialization and urbanization. Developed countries basically followed the trajectory of peaking carbon intensity first, and then almost simultaneously peaking the total carbon emissions and per capita carbon emissions. The per capita GDP of different countries at the time of carbon peaking varied greatly, but the urbanization rate exceeded 70%. Industrialization and urban infrastructure construction have been largely completed, the tertiary industry thrives as a result of population agglomeration, and the industrial structure gradually becomes technology-intensive. All of these basically pave the way for the realization of carbon peaking. The principal measures taken by developed countries to achieve carbon peaking include industrial structure upgrading, low-carbon fuel substitution, technological progress in energy efficiency, transfer of carbon-intensive manufacturing, and so on. For example, Britain was the first country to use coal to generate electricity, with its coal consumption peaking in 1956 (244 million tons). Therefore, it made active efforts to replace coal with oil, natural gas, nuclear power, etc., and coal consumption declined year by year, but the amount of coal used for power generation still rose, and it did not achieve carbon peaking until the 1970s. Developed countries have also encountered risks and difficulties in the process of the energy transition. These, if mishandled, will give rise to social conflicts and even political turmoil. For example, in February 2021, Texas state, which was a star performer in the U.S. energy transition, experienced extremely cold weather. The resulting large-scale power outages affected more than four million people, which further tore society apart. The average price of gas in California reached US$3.438 per gallon, which was far higher than the national average, and the price of electricity was 47% higher than the national average, all of which sparked many protests and legal lawsuits. From 2005 to 2012, electricity prices in the EU jumped by 38%, and natural gas prices rose by 35%. Since 2000, Germany has spent in excess of e243 billion on tax relief and renewable energy subsidies. The European Green Deal, a new green deal launched by the EU in December 2019, set the EU’s goals and roadmap for achieving carbon neutrality by 2050. Since taking office, U.S. President Joe Biden has stuck to his campaign proposal of promoting green and low-carbon development, which removed the adverse effects of the Trump administration. A comparison of carbon neutrality action plans in developed countries shows that: The key to carbon neutrality is energy transition. The first is a clear timetable for stopping the use of coal. In 2019, global coal accounted for about 27%. The World Wide Fund for Nature (WWF) called for countries to begin a process of immediately stopping the use of coal in order to meet the goals of the Paris Agreement. The developed countries of the OECD should completely stop using coal by 2035, and all countries around the world should completely get rid of coal-fired power by 2050. We should not entertain the illusion of continuing to use coal while relying on carbon, capture, utilization and storage (CCUS) technologies to solve the issue of carbon emissions. The “Powering Past Coal Alliance” (PPCA), which was jointly established by Britain, Canada and other countries in 2017, and now has a membership of over 80 countries, local governments and enterprises, has set a timetable

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for stopping the use of coal. Its global influence should not be underestimated. For example, the Biden administration in the United States has made plans for achieving zero carbon emissions in the power sector by 2035, scaling up renewable energy production, prioritizing clean energy investments, etc., and revoked the US$9 billion Keystone pipeline development program. Germany, a coal powerhouse, approved a bill revoking coal-fired power generation in 2020. It originally planned to completely stop using coal by 2038, but as the EU set carbon neutrality targets and raised emission reduction targets by 2030, Germany is obviously stepping up a gear to stop using coal, and has significantly cut coal imports for four straight years since 2016. Second, vigorously promote the cleaner, electricity-powered and intelligent development of transportation and construction sectors. Developed countries have basically completed industrialization, and their transportation and construction sectors, each accounting for about one-third of total emissions, become key sources of emissions. Back in 2018, Europe put forward a long-term strategic vision of climate neutral economy, advocating clean and connected transportation, smart network infrastructure, zero-emission buildings and a completely decarbonized energy supply. In 2019, the European Green Deal again emphasizes the development of clean, affordable and safe energy, sustainable and smart transportation, and energy-efficient renovation of buildings. The British government issued an energy white paper, which, in addition to moving towards a zero-carbon power system, places a high value on low-carbon alternative technology solutions for residential heating, the establishment of low-carbon industrial clusters, and the withdrawal of gasoline and diesel vehicles from sales. Third, develop and use new technologies for carbon neutrality. Carbon neutrality must rely on technological innovation, which will bring about a new wave of technological revolution. Europe and the United States place a high value on guiding the public and private sectors to scale up R&D efforts in key technology areas, such as energy storage, sustainable fuels, hydrogen energy, as well as CCUS technologies. The EU and Japan have made plans for the systematic and deep application of hydrogen energy technology in many fields such as energy supply, industrial production, and transportation. Many countries have initiated research on negative emission technologies such as bioenergy with carbon capture and storage (BECCS) and direct air capture (DAC). Japan intends to begin commercially exploring negative emission technologies in 2023. Finally, increase carbon neutrality-related legislation and improve the climate policy system. For example, Britain passed an amendment to the Climate Change Act in June 2019, becoming the world’s first country to set carbon neutrality targets in the form of domestic legislation. The European Commission’s draft European Climate Law, submitted in March 2020, also lays down in the form of legislation the target of achieving carbon neutrality by 2050. The EU is trying to update the European Union Emissions Trading System (EU ETS) to include construction and ocean shipping sectors, and also considers removing fossil fuel subsidies and setting CBAM for selected industries. After Brexit, Britain launched its own Emissions Trading System (UK ETS) on January 1, 2021, with an emission ceiling lower than the EU system by 5%. On December 25, 2020, the Japanese government issued a

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“Green Growth Strategy” with the purpose of realizing green GDP of US$1.8 trillion and net zero carbon emissions by 2050 through tax incentives, green funds, etc.

4 Strategic Significance of China’s Proposal of Carbon Peaking and Carbon Neutrality Goals 4.1 China’s Strategic Consideration for Setting the “Dual Carbon” Goals The ninth meeting of the Central Committee for Financial and Economic Affairs stressed that China’s efforts to achieve carbon peaking by 2030 and carbon neutrality by 2060 are a major strategic well-considered decision made by the CPC Central Committee, and it concerns the long-term development of the Chinese nation and the building of a community with a shared future for mankind. To put it another way, the “dual carbons” goals go beyond tackling climate change, and this is a critical undertaking of a global, long-term and coordinated nature. From an international perspective, China must achieve carbon peaking and carbon neutrality to fulfill its responsibilities as a major power and practice overall diplomacy. Climate change is an important area of international cooperation, and the Paris Agreement is a key legal basis for international climate cooperation and the hard-earned result of long-term endeavors by the international community. China’s proposal of the “dual carbon” goals demonstrates its action to fulfill its international responsibilities as a responsible major power and promote the building of a community with a shared future for mankind. This gives a strong political impetus to the implementation of the Paris Agreement, global climate governance as well as post-COVID-19 green recovery. At the domestic level, achieving carbon peaking and carbon neutrality is an inherent requirement for China’s sustainable development, and is a key starting point for making ecological progress and building a beautiful China. Striving for carbon peaking and carbon neutrality has made China more resolved to pursue green and low-carbon development, and also depicts a blueprint for China’s future realization of green, low-carbon and high-quality development. The 19th CPC National Congress put forward the “two centennial goals”. The year 2021 marks the 100th anniversary of the founding of the CPC. The first centenary goal of building a moderately prosperous society in all respects has been achieved. On this basis, China has drawn up a two-stage development plan for the period from 2020 to the middle of this century: basically realize socialist modernization by 2035, and develop China into a great modern socialist country that is prosperous, strong, democratic, culturally advanced, harmonious, and beautiful by the middle of the 21st century. The “dual carbon” goals dovetail with the two stages of modernization. It is necessary to be aware that the “dual carbon” goals are of a systematic, longterm and coordinated nature. Achieving the “dual carbon” goals is the most essential

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measure to spur economic development and social prosperity as well as protect the ecological environment. It can spur the green economic recovery, drive technological and industrial upgrading, and lead to long-term economic growth. Deep carbon emission reductions can improve environmental quality, promote the emergence of green economy industries, and stimulate competition for new technologies. Carbon neutrality will be a symbol of modernization and core competitiveness, helping raise China’s global influence.

4.2 The Challenges and Opportunities for China to Achieve the “Dual Carbon” Goals China’s current carbon emissions are slowing down compared to the period from 2000 to 2010, but they are still growing and have not yet peaked. As the largest developing country, China must make the world’s highest reduction in carbon intensity. It takes merely 30 years to move from carbon peaking to carbon neutrality. It is no easy matter to achieve this goal at the fastest speed. China is the world’s largest producer and consumer of coal. In 2019, China’s coal production accounted for over 47% of the global total, and its coal consumption accounted for up to 51.7% of the global total. In 2019, 30 of the world’s 50 largest coal producers are Chinese enterprises. Compared with oil and natural gas, coal is the fossil energy variety with the highest carbon intensity. In terms of carbon content per unit of calorific value, coal is about 1.31 times more than that of oil and 1.72 times more than that of natural gas. In the context of the “dual carbon” goals, it is highly challenging to transition from the coal industry chain composed of development, utilization, transformation and other aspects to green and low-carbon development. It should also be noted that the process of achieving the “dual carbon” goals will bring a plethora of critical opportunities. For example, replacing fossil fuels with renewable energy is pivotal to the transformation of the energy system. The “dual carbon” goals indicate that in the long term, China must move faster to provide clean electricity, and to develop new energy featuring wind power and photovoltaic power. During the 13th Five-Year Plan period, China’s installed capacity of new energy increased by about 60 million kilowatts annually on average, with a growth rate of 32%, which was the fastest in the world. By the end of 2019, China’s installed capacity of new energy reached 414 million kilowatts, accounting for 20.63% of the total installed power capacity. Of this, the installed capacity was 210 million kilowatts for wind power, and 204 million kilowatts for photovoltaic power. The generating capacity of new energy reached 630 billion kWh, accounting for 8.6% of the total generating capacity. In 2020, the global generating capacity of renewable energy increased by nearly 7% compared with 2019 despite the COVID-19 pandemic, accounting for 28% of the total global generating capacity. According to the statistics from the National Energy Administration, in 2020, the new installed capacity of wind power connected to the grid in China reached 71.67 million kilowatts, and the new

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installed capacity of photovoltaic power was 48.2 million kilowatts, a year-on-year increase of 60%. Because a high proportion of renewable energy sources destabilize power grids, they must be supplemented by energy storage. At present, the development of energy storage technologies is on the increase, and technologies and business models are emerging, promising bright prospects. However, the characteristics of energy storage give rise to systematic and comprehensive problems in terms of application targets, conditions, safety, technology, business model, etc. This shows that energy storage cannot develop independently from the process of new energy development, the needs of power systems, and economic and social needs. It is believed that technological development and policy improvements set out in the 14th Five-Year Plan will point the way forward for energy storage, which will play a key role in promoting low-carbon transformation.

4.3 Outlook of China’s Carbon Peaking and Carbon Neutrality General Secretary Xi Jinping has stressed the importance of the work on carbon peaking and carbon neutrality on many international and domestic occasions. By the end of October 12, 2021, he had mentioned the “dual carbon” goals 28 times and made important plans in this regard, which show his importance attached to this work. The Central Economic Work Conference held on December 18, 2020 incorporated the work on carbon peaking and carbon neutrality into the eight key tasks in 2021. The meeting emphasized the need to do a good job in carbon peaking and carbon neutrality. China strives to achieve carbon peaking by 2030 and carbon neutrality by 2060. We will move faster to formulate an action plan for carbon peaking by 2030, and support local regions where conditions permit to take the lead in carbon peaking. We will move faster to adjust and optimize the industrial structure and energy structure, promote coal consumption to peak as soon as possible, vigorously develop new energy, move faster to build a national trading market for carbon use and emission permits, and improve the dual control system for energy consumption. We will take further steps to prevent and control pollution and build up synergy between pollution and carbon emissions reduction. We will promote large-scale afforestation to enhance the carbon sequestration capacity of the ecosystem.3 The ninth meeting of the Central Committee for Financial and Economic Affairs held on March 15, 2021 emphasized that the realization of carbon peaking and carbon neutrality is a wide-ranging and profound systemic change in the economy and society. It is necessary to include carbon peaking and carbon neutrality in the overall plan for ecological progress, and take resolute efforts to achieve the goals of carbon peaking by 2030 and carbon neutrality by 2060. China’s efforts to achieve 3

“Central Economic Work Conference Held in Beijing”, People’s Daily, December 19, 2020.

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carbon peaking by 2030 and carbon neutrality by 2060 is a major strategic wellconsidered decision made by the CPC Central Committee, and it concerns the longterm development of the Chinese nation and the building of a community with a shared future for mankind. We must resolutely apply the new development philosophy and systems thinking, and strike a balance between development and emissions reduction, between overall and local imperatives, and between short-term and longerterm considerations. We will aim to achieve greener economic and social development in all aspects, with a special focus on developing green and low-carbon energy. We will move faster to form an energy- and resource-efficient and environmentfriendly structure of industries, ways of work and life and a spatial network. We will continue to prioritize ecological conservation and pursue a green and low-carbon path to high-quality development. Achieving carbon peaking and carbon neutrality is an uphill battle as well as an acid test of our Party’s governance capacity.4 At the Leaders Summit on Climate held on April 22, 2021, Chinese President Xi Jinping said that: “China will strive to achieve carbon peaking by 2030 and carbon neutrality by 2060. This major strategic decision is made based on our sense of responsibility to build a community with a shared future for mankind and our own need to secure sustainable development. China has committed to moving from carbon peaking to carbon neutrality in a much shorter time span than what might take many developed countries, and that requires extraordinarily hard efforts from China. The targets of carbon peaking and carbon neutrality have been added to China’s overall plan for ecological conservation. We are now making an action plan and are already taking strong nationwide actions toward carbon peaking. Support is being given to peaking pioneers from localities, sectors and companies. China will strictly control coal-fired power generation projects, and strictly limit the increase in coal consumption over the 14th Five-Year Plan period and phase it down in the 15th FiveYear Plan period. Moreover, China has decided to accept the Kigali Amendment to the Montreal Protocol and tighten regulations on non-carbon dioxide emissions. China’s national carbon market will also start trading.”5 President Xi Jinping delivered a keynote speech at the Leaders’ Summit of the 15th Meeting of the Conference of the Parties to the Convention on Biological Diversity held on October 12, 2021, pointing out that in order to meet the “dual carbon” goals, China will successively release implementation plans for carbon peaking in key localities and industries as well as a slew of supporting safeguard measures, which constitute the “1 + N” policy system. The Working Guidance for Carbon Peaking and Carbon Neutrality in Full and Faithful Implementation of the New Development Philosophy (hereinafter referred to as the Guidance) issued by the CPC Central Committee and the State Council on October 24, 2021 is exactly the “1” in the “1 + N”, which lays down the overall requirements and main goals of the follow-up 4

“Xi Jinping Presides Over the Ninth Meeting of the Central Committee for Financial and Economic Affairs, Stressing the Need to Promote the Regular, Healthy and Sustainable Development of Platform Economy and to Incorporate carbon peaking and Carbon Neutrality into China’s Overall Plan for Ecological Conservation”, People’s Daily, March 16, 2021. 5 Xi Jinping (2021).

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work. It is the most important top-level plan and a document for guiding the work on carbon peaking and carbon neutrality. Subsequently, the State Council issued the Action Plan for Carbon Dioxide Peaking Before 2030, which plans specific actions for carbon peaking in light of the Guidance. It is expected that various sectors and departments will successively introduce more specific policies and action plans. These will constitute a complete policy system for achieving the “dual carbon” goals. From a global perspective, the year 2020 can be described as the “first year of carbon neutrality”. Various countries set out carbon neutrality goals while updating the nationally determined contribution goals. This has inaugurated an international process towards the carbon neutrality goal, causing an important and far-reaching impact on the future world economy and international order. As a big country, China must be actively involved in this process and strive to play a leading role.

References Chen Ying and Chao Qingchen, 100 Questions on Emission Peak and Carbon Neutrality, People’s Daily Publishing House, 2021 edition, pp. 100–102. Xi Jinping, “For Man and Nature: Building a Community of Life Together: Speech at the Leaders Summit on Climate”, People’s Daily, April 23, 2021.

Chapter 3

The Practice Roadmap to Carbon Peaking and Carbon Neutrality Zhou Hongchun, Zhou Chun, and Li Changzheng

Achieving the goals of carbon peaking by 2030 and carbon neutrality by 2060 (hereinafter referred to as the “dual carbon” goals) is a key policy orientation for China’s medium- and long-term development. The Working Guidance for Carbon Peaking and Carbon Neutrality in Full and Faithful Implementation of the New Development Philosophy released by the CPC Central Committee and the State Council in October 2021 makes specific plans for the “dual carbon” goals. This is a wide-ranging and profound systemic change in China’s economy and society. According to the requirements of the CPC Central Committee, local governments at all levels are studying and formulating action plans for carbon peaking and include them into the overall plan for ecological conservation. According to the plan made by the CPC Central Committee, we must strike a balance between development and emissions reduction, between overall and local imperatives, and between short- term and long-term considerations, and make vigorous efforts to achieve the “dual carbon” goals on schedule.

Z. Hongchun (B) Development Research Center of the State Council, Beijing, China e-mail: [email protected] Z. Chun Clean Heating Industry Committee of China Building Energy Efficiency Association, Beijing, China L. Changzheng Guofa Green Institute on Energy Conservation and Environmental Protection Technology, Beijing, China © China Financial & Economic Publishing House 2023 G. Zhuang and H. Zhou (eds.), China’s Road to Carbon Peaking and Carbon Neutrality, https://doi.org/10.1007/978-981-99-3122-4_3

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1 Carbon Neutrality will cause a Wide-Ranging and Profound Social Change Carbon neutrality means offsetting anthropogenic carbon emissions through a variety of ways in a given area over a specified period of time. Studies reveal that energy saving is the lowest-cost path to carbon peaking and carbon neutrality. Given China’s reality, we must not only promote energy conservation in industries, transportation and buildings, but also reduce waste and make full use of all the energy resources that can be used in work and life, and realize an effective combination of economic, social and environmental benefits. The first is to promote carbon peaking and carbon neutrality based on the idea of economic development and emissions reduction. In general, Western countries have completed industrialization and urbanization, and peaked carbon emissions. They now reach a stage that features declining carbon intensity, cleaner energy resources, and increasing public awareness. China is a different case. China will basically achieve modernization by 2035, meaning that the historical task of industrialization and urbanization remains to be fulfilled. Therefore, energy resource consumption, pollutants and carbon dioxide emissions will still increase in this process. Cognizant of the arduous task of achieving carbon neutrality, we must solve the problem of carbon emissions reduction through development. The second is to focus more on increase, not merely on reduction. According to the BP Statistical Review of World Energy (2020), energy consumption and carbon emissions in the EU peaked in 2006, and decreased by 22.4% by 2019. It is a case of “double peak” and “double decline”. Unlike EU member states, by 2019, China’s energy consumption and carbon emissions increased by 69.7% and 47.2%, respectively, from the 2006 level, and are still in the stage of “double rise”; China only has 30 years to go to achieve carbon neutrality by 2060. Administrators at all levels are required to leverage their wisdom to develop the economy and also promote carbon peaking and carbon neutrality in the context of low per capita energy consumption and a tight timescale. The third is to strike a dynamic balance between adding capacity and eliminating backward production capacity. An imbalance between “elimination” and “addition” will bring hidden dangers to energy security. The “power rationing” has sent a message: the power supply cannot meet the public demand for energy. Judging from international experience, countries and regions that fell into the “middle-income trap” were required by the spokesmen of developed countries to reorganize small enterprises and implement high- standard environmental protection measures ahead of schedule. This resulted in a host of problems such as laid-off workers and a widening income gap in these countries and regions. Therefore, it is necessary to gradually limit coal production and consumption on the premise of increasing the renewable energy supply and ensuring energy security, instead of taking a “one-size-fits-all” method to reduce coal and carbon emissions, resulting in a short supply.

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The fourth is not to plan future energy development with outdated ideas. China is characterized by a large population. It is necessary to take full account of the people’s growing needs for a better life, and we must not force people to move backwards to an “agrarian society” for the sake of carbon peaking and carbon neutrality. Even in developed countries, it is required that the development of “newcomers” should not be affected. China has a great number of farmers who have just been lifted out of poverty, and China also needs to become a great modern socialist country. In 2019, China’s per capita energy consumption was only 3.47 tons of standard coal, which is not high compared to the upwards of 6 tons in Western countries. However, due to the primary energy structure featuring coal, China’s per capita carbon dioxide emissions are close to those of EU member states, and China faces tremendous international pressure to reduce emissions. Therefore, it is necessary to leverage the institutional strength of pooling nationwide efforts for a big undertaking, move faster to develop green and low-carbon technologies, particularly game- changing technologies, and explore a path to low-carbon development in light of national conditions. The fifth is to integrate the energy structure adjustment and reshape value needs in the context of carbon neutrality. Carbon emission reduction levels for different energy types should be accurately evaluated. For example, since the production of photovoltaic power generation materials such as polysilicon and monocrystalline silicon consumes a lot of energy, photovoltaic power is not “zero carbon” energy. Biomass is the fourth largest type of energy after coal, oil and natural gas, and its utilization efficiency is also higher than that of solar energy. If fully utilized, biomass can replace 17 to 24% of fossil energy in energy consumption. The Nordic countries place a high value on the efficient use of biomass energy, primarily for heating; and 17% of the terminal energy consumption comes from renewable energy. China can learn from them in this regard.

2 Promote Whole−Chain and Full Lifecycle Energy Revolution Energy restructuring is essential for achieving carbon peaking and carbon neutrality. To achieve the “dual carbon” goals, we must promote an all-round energy revolution in the whole chain throughout the lifecycle. We should optimize the energy structure, establish a clean, low-carbon, safe and efficient energy system, endeavor to control the total fossil energy on the premise of ensuring supply, and promote coal consumption to peak as soon as possible. We should rationally develop natural gas, develop nuclear power in a safe manner, vigorously develop non-fossil energy such as hydropower, wind power, solar power, and biomass energy; increase the supply of green hydrogen energy, launch renewable energy substitution campaigns, and use non-fossil energy to meet the demand for new energy and replace the consumption of fossil energy in stock. We should change the model of energy transformation, deepen the reform of the electric power system, build a new-type electric power system featuring new

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energy, promote electrification at the consumption end, and realize digital and smart energy management. Judging from the law of energy development, humanity initially used biomass energy before using coal, oil, and natural gas, and the history of the use of renewable energy is short. The energy structure has undergone an evolution process from low carbon to high carbon and back to low carbon again. The primary energy structure featuring fossil energy represented by oil and gas is shifting to one dominated by clean energy represented by solar energy and wind energy. Electric energy will become the principal consumer goods. Clean energy should shift to electric energy, and the production and consumption of electric energy primarily come from clean energy. Fossil energy should be gradually phased out from energy production and consumption. Electricity and thermal production rely primarily on renewable energy rather than fossil energy, achieving “clean substitution”. In the consumption sector, we primarily achieve “electric energy substitution” by replacing fossil energy with electric energy. We achieve the goal of carbon reduction in the energy sector through clean substitution and electric energy substitution. According to the IPCC assessment report, in order to achieve the target of 2°C temperature control, the global clean energy should account for about 50% (44% to 65%) of primary energy by 2050; in order to achieve the target of 1.5°C temperature control, the proportion of clean energy should be higher. China is now changing its energy structure. According to the Chinese Academy of Engineering’s major consulting program “Research on the strategy of promoting energy production and consumption revolution”, China’s energy revolution will take place from 2020 to 2030, which primarily implements the strategy of replacing coal with clean energy. The period from 2030 to 2050 is a constant period for the energy sector, a new-type energy system that features “rationalized demand, green development, diversified supply, intelligent deployment, and efficient utilization” will be formed. Coal, oil and natural gas are non-renewable and will be depleted. Coal is a factor of productivity, a polycyclic aromatic hydrocarbon (PAH) substance. We should not regard it as “black gold” when we need it, nor shun it just because a foreign organization considers it “dirty energy”. Different energy varieties should be gauged using a “scale”. Whether coal is clean or not is associated with its way of utilization. If used properly, it can meet the requirements of environmental protection and energy security, and can also guarantee energy security. China should and must upgrade the energy structure in a way different from that of Western countries, skipping oil and gas, and increasing the proportion of electricity in end-user consumption. On the production side, we should build a safe, clean, low-carbon, efficient and sustainable energy system. In the conversion process, coal should be used to the greatest extent. At the consumption end, we should prioritize energy conservation and efficiency improvement, optimize the relationship among power sources, networks, loads, storage and use, control the quantity of coal, oil and natural gas while increasing efficiency, increase the proportion of non-fossil energy, spur the energy technology revolution, and promote the deep integration of energy with information and data.

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Coal-based polygeneration integrating energy, chemical engineering and environmental protection is an important direction. In December 2016, Shenhua Ningxia Coal Industry Group put into full operation the indirect coal liquefaction project with an annual capacity of four million tons, which produced qualified oil products. This realized the “black to white” and heavy-to-light transformation. General Secretary Xi Jinping made important instructions on the operation of this demonstration project: The completion and operation of this major project is important for China to boost its independent support capabilities in energy, promote clean and efficient utilization of coal, and spur the development of ethnic minority areas. It is a useful exploration of safe, efficient, clean and low-carbon development of energy, and is a significant achievement for the innovation-driven development strategy. The clean mining and utilization of coal is very mature theoretically, practically, technologically and economically. From the perspective of carbon neutrality policy, we must tap the potential of clean utilization of coal, which is also essential for ensuring national energy security. The coal industry calls for a wide-ranging and indepth transformation. We should promote the green transformation and development of the coal sector, and realize low-carbon transformation throughout the lifecycle covering coal exploration, mining, processing and utilization, and waste disposal. We should use coal as a “fuel + raw material”, promote coal use based on grades and quality, and realize the green, large-scale, intensive, low-carbon and intelligent development of the coal industry. We should operate the standards of “green mine”, and pay attention to safe and green mining. Under the premise of safety, the coal that can be mined will be mined in a coal industry that is of better quality, more efficient, fair, sustainable and safe. Some experts regard “de-coaling” and the development of renewable energy as a fundamental approach to carbon peaking and carbon neutrality, which may be a good option in the context of the current technological and economic conditions. However, from another viewpoint, the coal industry will bear the brunt as we strive to meet the “dual carbon” goals. Of course, in the absence of coal production and consumption, it is difficult for China to enjoy energy security. Coal has always been the principal primary energy source in China. In 2020, coal accounted for 56.8% of China’s primary energy structure, and coal-based power accounted for about 72%. Therefore, given China’s energy resource endowments of abundant coal, little natural gas and oil poverty, we must prioritize reforming the ways of production and transformation of coal, and turn the carbon dioxide emitted by power generation into useful materials, thereby achieving “near zero emissions” from coal consumption. It is necessary to make a shift from regarding coal as a fuel to regarding it as raw materials, from laborintensive to the technology-intensive sector, from polluting to the environmentally friendly sector, and from high-risk industry to safe industry. For coal mining, we should develop and apply new technologies of tunneling, mining, transportation, etc. instead of using “manpower-driven” methods. We should move from labor-intensive to technology-intensive practices, and from mechanization to smart development, and complete industrial upgrading as well as the extension of the industrial chain. Efforts should be made to ensure ecological safety, and the focus should shift from

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reducing safety accidents to occupational safety and health. Economic, social and ecological environmental benefits should be pursued in a coordinated manner. Electricity, heat and other types of energy (such as hydrogen energy) should be integrated, and the proportion of clean energy and electrification will be increased through grid connectivity, thereby optimizing the pattern of electricity allocation and consumption. China is rich in clean energy resources, but resource-rich areas are not exactly the areas that use resources. Hydropower resources are concentrated in southwest China, accounting for 67% of the national total. Wind energy resources are concentrated in the “Three North” regions, where the economically viable volume accounts for over 90% of the national total. Solar energy resources in northwest China account for more than 80% of the national total. However, about 70% of electricity is used in the eastern coastal and central provinces. The areas that use resources are 1000–4000 km away from resource-rich areas. Only through grid connectivity can we develop and utilize clean energy on a large scale, and achieve complementary use of wind and solar energy, regional mutual aid, balance electricity production and consumption, and ensure energy security.

3 Reduce Carbon Dioxide Emitted by Industrial “Processes” and Improve the Energy Use Efficiency China is now moving towards high-quality economic development. To achieve the “dual carbon” goals, it is necessary to prioritize improving energy efficiency, continue to reduce pollution and carbon emissions and enhance energy efficiency in the fields of industry, construction, transportation and other fields, move faster to build resource-saving, environmentally friendly and climate friendly industrial structure, ways of work and life, and spatial pattern. Technical paths to achieving carbon neutrality fall into four categories: First, energy conservation and efficiency improvement is one of the key measures to reduce carbon emissions. In 2019, China’s energy intensity was 1.3 times more than the world average, far higher than that of developed countries such as the United States, Britain, France, Germany, and Japan. At the current consumption level, reducing energy consumption by 1% can reduce the consumption of about 50 million tons of standard coal and reduce over 100 million tons of carbon dioxide. It is necessary to adjust the industrial structure, curb energy-intensive industries, develop high-tech and modern service industries, and promote the replacement of coal-fired boilers with technologies such as “heat pump + electric heating”. It is necessary to raise energy- saving standards for buildings, deepen the energy-saving and low-carbon transformation of existing buildings, and optimize the structure of energy use for buildings. In the field of transportation, we should promote the substitution of oil by electricity, hydrogen, etc., to reduce traffic pollutant emissions. In the electric power sector, we should develop smart grids (distributed) and make power equipment energy-saving, and promote the application of carbon capture, utilization and storage

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(CCUS) technology. Second, make traditional energy sources cleaner. We should promote the safe and green development and utilization of coal, as well as its clean and efficient use, and improve the efficiency of energy conversion. Third, develop new energy. We should develop wind power, photovoltaic power, hot dry rock and other businesses, make plans for the all-hydrogen industrial chain, and accelerate the research and application of bioenergy, as well as the large-scale development of geothermal resources. Fourth, improve the capacity of natural ecosystems as carbon sinks and conduct evaluations related to carbon capture and storage.

3.1 Focus on Improving the Level of Electrification in Major Fields The Working Guidance for carbon peaking and Carbon Neutrality in Full and Faithful Implementation of the New Development Philosophy issued by the CPC Central Committee and the State Council set a “timetable” and “roadmap” for achieving the “dual carbon” goals, and is a major initiative for China to achieve high-quality development, realize ecological conservation, safeguard national energy security, and build a community with a shared future for mankind. From the perspective of implementation, it is necessary to focus on the following respects: The first is to promote green manufacturing in the industrial field. Industry is fundamental for building a strong country, meeting people’s needs for food, clothing, housing, transportation, travel and other daily necessities. It is necessary to optimize and upgrade the industrial structure, strictly control the expansion of energy-intensive sectors with high emissions, and conduct campaigns of energy saving, and emission and carbon reduction at key enterprises. It is necessary to adopt advanced, appropriate energy- saving and environmentally friendly technologies to transform traditional industries; eliminate ways of work that waste resources and pollute the environment; promote green, law-carbon intelligent manufacturing featured by decarbonization and industrial Internet, and ensure the safety of the industrial chain and supply chain. It is necessary to develop a green and low-carbon circular economy, guide enterprises to settle in industrial parks, carry out green design and product manufacturing, and promote environmentally friendly industrial parks. It is necessary to make better use of waste heat. As science and technology advance, low-grade heat energy can be directly provided by electric energy, and heating can be achieved through waste heat utilization, stability matching, cascade utilization, biomass-based hydrogen production, and other means, thereby improving the level of electrification and low- carbon development in the industrial fields. We should develop information technology, biotechnology, smart manufacturing, high-end equipment, new energy and other industries and products, and form new forms and models of business. We should vigorously develop the circular economy and low-carbon economy, turn waste into wealth, make lightweight poison-free products with low carbon emissions, thereby blazing a new trail to industrialization featuring high scientific and

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technological content, good economic returns, low resources consumption, and little environmental pollution. The second is to start with promoting cleaner production and make resource, environment and climate management throughout the lifecycle. We should not only focus on making breakthroughs first in carbon reduction, energy conservation, environmental protection, clean energy, etc., but also conduct mandatory cleaner production audits in accordance with the law in energy- intensive industries that excessively emit pollutants and use toxic and hazardous raw materials. The term “cleaner production” was first mentioned at the International Symposium on Waste-Free Processes and Waste-Free Production held in Paris in 1976. It originally means “eliminating sources of pollution”. In May 1989, the UN Environment Programme proposed the concept of “cleaner production”, which primarily employs technical and management means such as pollution audits, process screening, and implementation of pollution prevention and control measures for the rational utilization of natural resources, maximize the economic benefits of enterprises, and minimize risks to human health and the environment. The analytical instrument for cleaner production is the life cycle assessment (LCA) method. The third is to adjust the layout of parks and optimize their industrial structure. It is necessary to step up efforts to build green infrastructure, and improve the management service and mechanism innovation capacity of parks, thereby driving the intensive, functional and large-scale development of the park sector. Since the reform and opening up, China’s economic development zones, high-tech zones, bonded zones and free trade zones have made practical explorations, thus playing a vital role in the regional and even national economic and social development as well as international cooperation and exchanges. By the end of 2019, China had 628 national-level development zones, 2053 provincial-level development zones, and some 25000 industrial parks of various types, and a multi-type and multi-level industrial park system has been established. These become the most open and dynamic vehicles and platforms of the industrial cluster with the best comprehensive strength in China’s economic development. In a new stage of development, high-quality development is the keynote of China’s economic and social development. The park projects of various types should be built in the direction of “system integration, optimization and upgrading”. In terms of investment attraction, the focus should shift from “policy” and “benefits” to “services” and “environment”. Optimizing the business environment is the top priority of the park’s work. Each park, in light of the theme of building a green and low- carbon circular economy, should give full play to their advantages, and develop the characteristics and strengths of intensive development. The fourth is to analyze the flow of materials and energy in localities, parks or enterprises, and expand to “six chains and six flows”. “Six chains” refer to product chain, industrial chain, supply chain, knowledge chain, value chain and innovation chain. “Six flows” refer to the flow of materials, flow of energy, information flow, capital flow, technology flow and waste flow. We should start with the key links of the value chain, take the productive forces such as people flow, logistics, information flow, and capital flow into account, extend the industrial chain based on demand, upgrade the value chain, and extend to both ends of the value chain curve (at the left

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end are patents, intellectual property rights, enterprise standards, etc., at the right end are brands and services). Industrial upgrading can start with import substitution. Great efforts can be made to build parks or featured towns relating to modern agriculture, cultural tourism, and so on. Local governments should provide systematic training services and strategic consulting services for enterprises, and develop producer services. While focusing on sales data and profits, enterprises should integrate into the new development pattern with the domestic and international cycles reinforcing each other, and the domestic cycle being the mainstay. The fifth is to make overall plans for pollution and carbon reduction work in parks with systems thinking. Industrial parks should make simultaneous progress in “three savings and three reductions”. “Three savings” refer to land, energy and water conservation. “Three reductions” refer to the reduction of materials (such as lightweight vehicles), pollution reduction (reduction of pollutant emissions), and carbon reduction (reduction of carbon dioxide emissions). The essence of the savings and reductions is to improve the efficiency of resource utilization and cut pollutants and greenhouse gas emissions like carbon dioxide. This can be achieved by guiding enterprises to settle in industrial parks (enterprise clusters) and industrial agglomeration for intensive development. Industrial parks should place a higher value on attracting industrial chain investment to supplement the chain and ensure the safety of the industrial chain and supply chain. All types of parks should cultivate featured industries based on one theme as much as possible. While ensuring the development of key parks, we should promote the specialized, intensive and large-scale development of industrial parks in response to problems such as repeated construction and similar layout. New enterprises and projects in industrial parks should be guided, and enterprise clusters with distinctive characteristics and supporting upstream and downstream services should be established. It is necessary to build flagship parks to accumulate experience that can be copied and promoted elsewhere, thereby boosting the quality and competitiveness of enterprises in industrial parks. We should apply systems thinking to the “three savings and three reductions” campaign. According to the studies by the Chinese Academy of Engineering, energy, environmental protection and climate have the characteristics of the same sources. In other words, emissions of pollutants and greenhouse gases are related to energy utilization. Therefore, special attention must be given to the clean, efficient and sustainable use of energy. The first is the maximum utilization of coal, which requires temperature matching and cascade utilization in energy use. For example, the use of waste heat at coal- fired power plants and the reduction of steam emissions from cooling towers can maximize energy efficiency, as well as reduce the urban heat island effect. The second is the integrated pollutant treatment, such as the integration of pollutant abatement in thermal power plants. To put it another way, dedusting, desulfurization, denitrification, and mercury removal should be completed simultaneously as far as possible. This not only cuts operating costs, but also prevents the emission of another pollutant into the atmosphere when controlling a certain type of pollutant (such as ammonia escape caused by denitrification increases smog, causing secondary pollution). The third is to turn carbon dioxide into wealth. For example, carbon dioxide emitted by power plants can be made into products through

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the collection, filtration and purification (reaching food grade or industrial purity level). Carbon dioxide can be applied to many industrial purposes. For example, carbon dioxide of different purities is needed for greenhouses, grain depots, fluecured tobacco and other production processes. Connecting these links can lead to a new category of the economy: carbon circular economy.

3.2 The General Idea of Promoting Green and Low-Carbon Industrial Development During the 14th Five-Year Plan Period The Outline of the 14th Five-Year Plan sets out the main objectives of economic and social development. China has also issued Long-Range Objectives Through the Year 2035. For the green and low-carbon development of industries, we will take the initiative to make a comparison with benchmarks and put thoughts into action. We will take a goal-oriented, problem-oriented approach, exercise process control and performance management, improve measures, detail the timetable and construction drawings, focus on development driven by innovation, reform, and integration, work harder to make China a manufacturing powerhouse, and provide strong support for a good start to build a modern socialist country in all respects. The first is to focus on promoting green industries and build a green manufacturing system. Green industry is essential for “making intensive use of resources, reducing pollutant emissions, reducing environmental impact, boosting labor productivity, and enhancing sustainable development capacity”. Efforts can be made in terms of industrial layout, structural adjustment, lifecycle environmental management, technology promotion and innovation, as well as incentive and constraint mechanisms. We will apply the green development philosophy to all fields of the industrial economy, the whole process of industrial production, and corporate management. We will stick to energy conservation, and emission and carbon reduction in the industrial sector, promote ecologically friendly designs, clean processes and waste recycling, and make products more energy-saving, environmentally friendly and low- carbon. Green industrial parks will be developed vigorously. In accordance with the ecological concept, requirements for cleaner production, and industrial coupling and linkage methods, we will strengthen park and industrial planning, infrastructure construction and operation management, and construct “zero” emission parks with distinctive characteristics and demonstration significance. We will build environmentally friendly factories in key industries that feature intensive plants, harmless raw materials, low-carbon energy, and a livable environment. We will explore and form a green factory model that can be copied and promoted. Green procurement standards and systems will be continuously improved. We will give overall consideration to design, procurement, production, packaging, logistics, sales, recycling and other links. We will create a green and low-carbon supply chain, and fulfill corporate social responsibility for ecological environmental protection, energy conservation,

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emission reduction, etc., thereby ensuring the safety of the industrial chain and supply chain. The second is to continuously optimize and upgrade the industrial structure. Industrial restructuring is an inherent requirement for improving industrial quality and pursuing high-quality development. We will make further progress in supply-side structural reform, make breakthroughs in building a high-quality industry foundation and modernizing the industrial chain, and make the manufacturing supply system more adapted to domestic demands. We will launch operations to pursue green and low-carbon industry, strictly control capacity expansion in the heavy and chemical industries, and make progress in consolidating achievements, enhancing vitality, improving the level of the industrial chain and ensuring unimpeded economic circulation. We will launch major technological transformation and upgrading programs as well as quality improvement campaigns, promote energy-saving, environmentally friendly and low-carbon technologies and products, make breakthroughs in core technologies and products in key fields, and remove technical obstacles to development. We will spawn more original and game-changing technologies, focus on core basic parts, basic components for key industries, advanced basic manufacturing processes and equipment, basic materials for key industries, and industrial software, strive to increase varieties, improve quality, and build brands, and raise the overall standards of the industry. We will promote the development of emerging industries of strategic significance such as integrated circuits, 5G, new energy, new materials, highend equipment, new energy vehicles, and environmental protection, and establish a number of internationally competitive industrial clusters. We will improve the system for hierarchical cultivation of high-quality enterprises, and work to nurture specialized and sophisticated enterprises that produce new and unique products, single champion manufacturing enterprises as well as ecologically competitive leading enterprises with core competitiveness in the industrial chain. The third is to step up efforts to improve capacity for industrial innovation. We will implement the strategy of innovation-driven development, and regard selfreliance as strategic support. Breakthroughs are being made at a faster pace in new-generation information technology, new material technology, new energy technology, etc., exerting a profound impact on the world economic development model and the pattern of international industrial specialization. We will give full play to China’s advantages as a super-large market and its institutional strengths, and focus on integrated circuits, key software, key new materials, major equipment, as well as the industrial Internet. We will work to boost core competitiveness, further build a synergistic innovation system for manufacturing, and enhance the provision of basic generic technologies. We will vigorously develop green and low-carbon technologies for ultra-low emissions, resource recycling, and clean and efficient utilization of traditional energy, promote green manufacturing, and create more demonstration projects such as green parks, green factories, and green supply chains. We will support leading enterprises in forming innovation consortiums in concert with scientific institutes, universities

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as well as small and medium-sized enterprises, and move faster to build a manufacturing innovation center network system featuring national manufacturing innovation centers. We will build green manufacturing R&D as well as promotion and application bases, and innovation platforms, accelerate the application and commercialization of innovative achievements, and speed up the digital transformation of the existing industries. We will underscore the mainstay role of enterprises in innovation, promote the industrial and large-scale application of new technologies, and make the industrial chain more resilient and elastic, ensuring that we do not “drop the ball”. The fourth is to promote the coordination of industrialization, informatization and eco-friendly development. We will ensure synergy for industrial energy saving, and emission and carbon reduction. We will implement the “double control” policy for energy consumption, strictly control new production capacity in heavy and chemical industries, resolutely reduce the output of crude steel, strictly control new coal projects, and improve the early warning and release mechanism for information on production capacity. We will draw up action plans and roadmaps for carbon peaking in key industries. We will draw up an implementation roadmap for the automobile industry based on the goals of carbon peaking and carbon neutrality, strengthen innovation in the whole vehicle integration technology, and spur the parallel development of electrification and intelligent networking. We will enact supporting laws and regulations, improve the recycling rules, issue and enforce relevant standards, and promote the recycling of new energy vehicles’ power batteries, solar panels, etc. We will promote energy conservation and carbon reduction in new infrastructure, ensure rational distribution, and improve energy efficiency for the operation of facilities under construction and new facilities. We will promote the integration of information technology and traditional industrial manufacturing, and press ahead with industrial water saving and water pollution treatment. We will vigorously promote industrial water-saving operations in the Yellow River Basin and water-deficient areas in the Beijing- Tianjin-Hebei region; tighten industrial water-saving management; and promote enterprises in key industries to regularly conduct water-saving diagnosis and water balance tests. We will continue to make comprehensive and efficient utilization of resources, press ahead with bases building for comprehensive resource utilization, and promote the comprehensive utilization of industrial solid wastes; promote the recycling of resources such as electronic appliances and waste plastics; promote the circular linkage of key industries; vigorously develop the remanufacturing industry, promote the certification, popularization and application of remanufactured products, and improve efficiency. The fifth is to work to improve our control over the industrial chain and supply chain. This is essential for ensuring unimpeded flows in the national economy, ensuring industrial safety, and creating new favorable conditions for future development. An autonomous, complete, resilient and elastic industrial chain and supply chain is a key support for stable economic growth. China has the largest number of industrial categories and supporting facilities. Integrating into the world industrial division of labor system ensures the steady and sound economic development, and also makes a great contribution to the growth and development of the world economy. We will make strategic design and implement policies in a targeted manner

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by industry, bring into play the functions of the existing industrial clusters, carry out intensive development in advantageous areas, tap the potential of the industrial chain, and make plans for emerging industrial chains. We will give more prominence to improving the stability and competitiveness of the industrial chain as well as supply chain, reinforce and upgrade the industrial chain of the manufacturing sector, and implement industrial foundation reengineering projects. We will shore up weaknesses and consolidate strengths, make plans for emerging industrial chains, increase independent control over industrial chains and supply chains, shape new favorable conditions for future development, and firmly seize the initiative in the fiercely competitive international market. We will promote scientific and technological innovation in all respects, start with import substitution, upgrade the industrial structure and enhance the added value of products as well as scientific and technological content, and build a domestic production and supply system that is independent, controllable, safe and reliable.

4 Action on Carbon Peaking in Other Key Areas and Their Orientation Carbon neutrality is to “have a secure food supply”. Issues relating to agriculture, rural areas, and rural people are fundamental to China as they concern the nation economy and our people’s livelihood. The core of the rural revitalization strategy is to increase farmers’ income and improve the rural environment. We must keep more fertile farmland for farmers, enhance the role of farmland in carbon sequestration, and also leave to our future generations a beautiful homeland with green fields, clean water and a blue sky. To implement the ruralre revitalization strategy, we should give full play to the synergistic effect of featured towns, pastoral complexes, etc. We will promote the development model of the agricultural circular economy such as “breeding- animal husbandry-processing” and “pig breeding-plantation-biogas”. We will plant featured agricultural products, implement brand strategies, and improve the quality and added value of agricultural products. We will coordinate the construction of urban and rural facilities, dispose of rural sewage in an ecological manner, and constantly improve the capacity to treat and manage rural sewage and garbage. We will promote factors of production such as capital, technology, and talents in rural areas, cultivate “permanent” leaders for rural vitalization, and form a development pattern in which industry drives agriculture and urban and rural areas are integrated. In the construction field, it is necessary to raise standards for energy saving, promote green urbanization, and avoid high-carbon “lock-in”. Urbanization is a process of gathering people, optimizing the industrial structure and upgrading consumer goods. Instead of areas with chaotic functions, lack of “lifeline” projects, and short-lived buildings, urban and rural construction should feature areas with reasonable functions, a full range of facilities, and durable buildings. “A thousand cities with similar appearance” should be avoided as far as possible. It is necessary

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to be people-oriented, scientifically determine the boundaries and intensity of urban development, and rationally plan the space for work and living, while avoiding the situation in which residential buildings are mostly high rises. It is necessary to accelerate the construction of green and low-carbon infrastructure, and reform the building energy system based on electrification, photovoltaic buildings, and flexible electricity consumption systems. It is necessary to make full use of residual heat resources and biomass energy, build green and low-carbon buildings, respect the laws of nature, conserve natural landscape, and ensure that space for production is used intensively and efficiently. We will promote the integration of “photovoltaic power + buildings”, replace gas stoves with electric stoves, adopt electric heating, and increase the proportion of electricity consumption. Electricity should be produced more from new energy and renewable energy. We will construct green buildings with natural ventilation and lighting, ensure that the living space is livable and proper in size, promote a low-carbon and simple life style, encourage the use of energy- and water-saving, environmentally friendly household appliances, improve residents’ well-being at the cost of as low carbon emissions as possible, and ensure energy saving and low carbon throughout the residents’ lives in every respect. We will build a green and low-carbon transportation system. As urbanization deepens and residents enjoy higher living standards, China’s energy consumption for transportation will increase in the future. It is necessary to promote the reform of modes and structures of transportation, and pursue green and low-carbon modes of transportation. We will develop a comprehensive transportation system, vigorously produce zero-emission vehicles, give full play to the comparative advantages and combination efficiency of various modes of transportation, promote the connections of different modes of transportation, adopt green modes of transportation, and increase the use of clean, green and low-carbon power vehicles. We will establish a coordinated road system of rail transit, motor vehicles, bike sharing and pedestrians in large and medium-sized cities, ease “tidal” traffic congestion, and reduce the empty-loaded running of means of transportation. New energy vehicles will be promoted, and electrification for automobiles, rail transit, aviation, navigation, etc. will be significantly improved. We will develop smart logistics to support the flow of people and logistics with as low energy consumption as possible. Low-carbon mobility will be encouraged. We will place a high value on nature-based solutions without holding excessive expectations. Ecosystem carbon sinks are a key way to achieve carbon neutrality. It should be recognized that nature-based solutions have great potential for carbon reduction in the short term, but limited potential in the medium and long term. Forest ecosystems are the mainstay for carbon sequestration in China, accounting for about 80% of carbon sequestration, but as part of the normal cycle of biocarbon, forests are not the permanent solution to carbon storage. For example, carbon stored in trees may be released again as a result of forest fires. In 2019, China’s unified greenhouse gas emissions were about 14 billion tons. Emissions from fossil energy were about 10.2 billion tons, while forests as carbon sinks absorb about 1.2 billion tons of carbon dioxide per year. Carbon sinks of ecosystems alone cannot fill the huge gap for achieving carbon neutrality. Carbon dioxide emissions must be considerably reduced

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primarily by adjusting the energy structure, transforming the industrial structure, improving energy efficiency, and embracing a low-carbon way of life. Negative emission technology can only act as a supplement to offset the carbon emissions by coal-fired power plants that play a supporting role as well as non- CO2 greenhouse gas emissions that are difficult to reduce in the long term. Overemphasis on the application of CO2 removal technologies may increase the use of high-emission technologies in the near future to alleviate the pressure of carbon emissions reduction, thereby bringing greater unpredictability to climate warming. The circular economy should play an enormous role in reducing greenhouse gas emissions. According to the European Green Deal issued at the end of 2019, the European Commission put forward a roadmap for action on the Green Deal as well as available financing tools, covering all sectors of the economy, particularly transportation, energy, agriculture, construction as well as steel, cement, information and communication technology, textiles and chemical engineering. According to the Ellen MacArthur Foundation’s Completing the Picture: How the Circular Economy Tackles Climate Change (2019), selection of materials and land use are crucial; improving energy efficiency and developing and utilizing renewable energy can only address 55% of carbon emissions, while the remaining 45% associated with people’s daily lives, including the production processes of cars, clothing, food and other products must also be addressed.

5 Advocate a Green and Low-Carbon Way of Living Carbon neutrality will reshape all aspects of China’s economic and social development, and change everyone’s life in a profound way. A green way of life will become a social fashion. We will experience pain in the short term, but transformation must be made in the long term. We must resolutely apply the new development philosophy, prioritize the green and low-carbon development of energy, prioritize ecological conservation and pursue a green and low- carbon path to high-quality development, and move faster to develop spatial layouts, industrial structures as well as ways of work and life that help conserve resources and protect the environment. The energy people use has changed imperceptibly. Solar water heaters are a form of solar heat utilization. It often appeared in advertising and was widely used in rural areas. Nowadays, in addition to heat utilization of solar energy, photovoltaic power generation is developing apace, and it has long “entered into cities”, as evidenced by the “photovoltaic + building” integration model. In rural areas, a variety of development models are implemented, such as the “photovoltaic + agriculture” model of raising chickens and planting vegetables under photovoltaic panels, and the “photovoltaic + fishery” model of installing photovoltaic panels on the lake surface and fish farming in the lake. These are only part of renewable energy power generation. There are also wind power generation, biomass power generation, etc. In the context of achieving carbon neutrality, China will build a clean, low-carbon, safe and efficient energy system. The total utilization of fossil energy such as coal, oil and gas will

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be controlled, and renewable energy will replace fossil energy in power generation, with a new-type electric power system featuring new energy formed. In the traditional electric power system, coal-fired power generation and grid connection can be adjusted, while the electricity consumption end is random. In the new-type power system, solar power, wind power and electricity consumption are unpredictable. The new-type power system is characterized by random power generation and electricity consumption, which will not only make it difficult to regulate grid, but also bring hidden dangers to power consumption guarantee as a result of the mismatch of time and space between power generation and power consumption. It must be ensured by controllable basic energy. To improve people’s well-being, it is necessary to boost consumption and improve the consumption environment so that residents are able and are willing to make consumption. The “stay-at-home economy” is developing rapidly as a result of the COVID-19 pandemic, and “Internet plus” has become a key channel for consumption growth. Online consumption is booming. It is necessary to promote online and offline integration in depth and scope, and develop new forms and models of business, thus providing consumers with more products and services that bring convenience and comfort. We will improve the urban and rural distribution system, increase bulk consumption such as automobiles and household appliances, and boost consumption for services such as health, culture, tourism, and sports. We will promote e-commerce and express delivery services in rural areas, and boost consumption in counties and townships. Centering on improving people’s well-being and expanding demand, we will make effective institutional arrangements for rationally guiding consumption and savings, etc., including promoting employment, improving social insurance, optimizing the income distribution structure, and expanding middle- income groups. We will promote the effective combination of investment and consumption, guide green consumption with investment, and achieve balance between supply and demand at a high level in the new era. To improve people’s livelihood and enhance the well-being of the general public, it is necessary to increase the public’s spending power, and start with increasing the people’s income and cutting the cost of commodity manufacturing and distribution. Employment is a fundamental way to boost people’s income. It is necessary to do a good job in creating jobs for key populations such as university graduates, retired soldiers, and migrant workers. Continued policy support in fiscal, taxation, financial and other areas will be given to enterprises that do not lay off employees or make layoffs as few as possible. Social insurance subsidies will be given to those in flexible employment. We will work to remove household registration restrictions on taking out social insurance at the working place. Public engagement helps to achieve carbon peaking. We promote a green and low-carbon simple way of life, say no to luxury and waste, and practice economy in every aspect and small link our lives. We encourage green modes of mobility that efficiently use energy, emit little pollutants and benefit physical health, such as urban rail, bus and bike sharing. Unnecessary travel should be reduced. We mobilize the public to make waste sorting, reuse shopping bags, and use energy- and water-saving appliances. We will make green and low- carbon life a new fashion, meet the needs of

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better living standards and quality of life with as low energy consumption as possible, and stimulate the public initiative to conserve resources and protect the environment.

6 Countermeasures to Promote Carbon Peaking and Carbon Neutrality 6.1 Harmonize Understanding and Promote the Low-Carbon Transformation of Energy as Well as Economy and Society Net zero emissions are achieved when an organization’s emissions of all greenhouse gases (methane, HCFCs, etc., in addition to carbon dioxide) are counterbalanced by their removal from the atmosphere in a year. Climate neutrality is achieved when an organization’s activities exert no impact on the climate system. Carbon neutrality can be achieved through paths of carbon sinks such as afforestation. Net zero emissions refer to all greenhouse gas emissions, including those from natural cycles. Climate neutrality gives more consideration to other geophysical effects, including the direct or potential impact of possible geophysical effects on the environment. China’s “carbon neutrality” is more in line with the concept of “net zero emissions”, which means that the net greenhouse gas emissions by all sectors of the economy are zero. To achieve the “dual carbon” goals, China needs “a self-revolution,” which is by no means a change in the general sense. Instead, it is a profound and enormous change across the board. The energy as well as social and economic transformation will take place at a level unimaginable today. To begin with, we must raise awareness of the carbon neutrality target among policymakers, enterprise and the general public. We must recognize that tackling climate change “is not something that others want us to do, but that we do it on our own.” Second, policy orientation and market orientation will stimulate the initiative and enthusiasm of enterprises, so that they proactively engage in the research and development of new technologies. Only when the will and forces of all parties form a synergy can the transformation be effective.

6.2 Strengthen Top-Level Planning and Form a Long-Term Mechanism for Achieving the Long-Term Goals of Carbon Neutrality The Outline of the 14th Five-Year Plan (2021–2025) for National Economic and Social Development of the People’s Republic of China and Long- Range Objectives Through the Year 2035 clearly states that by 2035, socialist modernization will be

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basically achieved, a green way of work and living will be widely adopted, carbon emissions will steadily decline after peaking, there will be a fundamental improvement in the environment, with the goal of building a Beautiful China being basically attained. To achieve the goal of carbon peaking by 2030 and carbon neutrality by 2060, we should only break down the target indicators to apply top-down pressure, but also stimulate the forces of individuals, households, industry organizations and all sectors of society through incentive mechanisms, thus forming bottom-up and topdown forces. We will coordinate to promote the high-quality economic development and climate change response, boost ecological environment governance with climate change response, improve the system for governance, and achieve the modernization of governance capacity for climate change. We will play the decisive role of the market in allocating resources and achieve emission control targets at a lower cost. The carbon market can operate without time and space restrictions, so that carbon emission reduction applies to the entities with the lowest marginal cost. We will make the best use of market mechanisms such as carbon trading, and do a good job in the demonstration construction for carbon neutrality, zero carbon, etc.; leverage the “seed” role of public fiscal funds to promote the innovative development and application of low-carbon technology, zero-carbon technology, negative carbon technology, etc.; increase the support of green finance for energy transformation, industrial upgrading and technological upgrading, and conduct Belt and Road international cooperation. We will give full play the leading and forcing role of carbon peaking and carbon neutrality, be oriented to the common goal, and pool the forces of government departments, researchers and all sectors of society. Community-level emission reduction is a key part of individual participation in carbon neutrality. We can encourage communities to formulate low-carbon and zero-carbon plans, work to reduce total emissions and control per capita carbon emissions, focus on pursuing a zero-carbon way of living, and increase individuals’ acceptance of zero-carbon life.

6.3 Rely on Innovation to Achieve Low-Carbon and Intelligent Energy The energy transition must be driven by technological progress. During the first energy transition, coal replaced firewood, inaugurating an era of energy commercialization. During the second energy transition, coal was replaced by oil and gas, increasing the cost of energy consumption by 3 to 4 times. As a result of technological advances and innovation, the cost of developing non- fossil energy is far lower than that of fossil energy development, making it a cheap source of energy. Thanks to technological progress and large-scale utilization, for example, the cost of photovoltaic power generation is lower than that of coal-fired power generation.

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We will make major breakthroughs in green and low-carbon technologies, move faster to make plans for low-carbon frontier technology research, and accelerate the promotion and application of pollution and carbon reduction technologies. We develop safe and controllable low-carbon, zero-carbon and negative carbon technologies that feature low cost, high efficiency, obvious emission reduction effect, and great promotion prospects. We will vigorously develop in-depth decarbonization technologies such as large-scale energy storage, smart grid, distributed renewable energy as well as hydrogen energy. We will speed up the innovative integration of industrial technology with new materials, advanced manufacturing, informatization, and intelligent development. We will develop and promote electric vehicles and hydrogen fuel cell vehicles, and explore automobile battery rental models. We will promote energy-saving, clean and low-carbon energy use equipment to ensure clean utilization of coal in heating. We will establish a sound green and low-carbon technology assessment, a trading system as well as technological innovation service platforms, employ cloud computing, artificial intelligence and other technologies to optimize the energy systems, promote electrification and intelligent development, and develop new electric equipment and technologies such as electric vehicles, high-speed railways, and smart homes. We will make concentrated efforts for breakthroughs in core technology products and the “iteration” of independently innovative products, remove “bottlenecks” that restrict development, and realize all-round breakthroughs in core and key technologies. It is necessary to unleash vitality for innovation; significantly enhance capacity for technological and institutional innovations; make constant breakthroughs in new infrastructure, new technologies, new materials, new equipment, new products, and new forms of business; achieve the advanced, standardized, green, and intelligent forms of industry; and significantly enhance the modernization level of the industrial chain. We will speed up breakthroughs in key and core technologies for green and lowcarbon development. We will establish a new type of national system in a socialist market economy. Centering on the frontier areas of the new round of technological revolution and industrial transformation, we will make further plans for research and development in response to major national strategies and needs. The development of renewable energy is a priority for achieving carbon neutrality. Technological progress and large-scale development in wind power, photovoltaic power, energy storage, power electronics, and other areas have become a breakthrough in carbon neutrality in the energy sector. We will rely on technological progress to speed up the development and utilization of solar energy, and drive industrial upgrading. We can fulfill our “carbon reduction commitment” as long as we respect the laws of nature and market, implement scientific policies, and put in place a reasonable order. We will gather factors of innovation such as personnel, capital, technology and data. More lowcarbon and zero-carbon solutions will be constantly offered. In combination with high technologies in other fields, energy technology and its ancillary industries will become new growth areas driving China’s industrial upgrading. Technological advancement shortens the learning curve. We move from competition and rivalry to learning, cooperation and drawing on good practices. The building

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of a community with a shared future for mankind can start with low-carbon energy and response to climate change. Green and low-carbon science and technology should be studied and developed in light of the frontiers of global science and technology, the focus on economic development, the country’s major needs and people’s health as required by General Secretary Xi Jinping. Based on reality, it is necessary to solve the holistic and strategic technological problems such as the low-carbon utilization of high-carbon energy as well as the roadmap of low-carbon energy technology, and drive China’s green and low-carbon development with technological innovation. Carbon capture and storage technologies (collecting, transporting and storing underground carbon dioxide emitted) not only increase electricity generation cost and energy consumption (which will increase energy consumption by one third), but also pose risks such as leakage when stored underground. Therefore, it is not advisable to implement it as universal practice in local action plans except for a few pilot programs. The second article of the Top 10 Emerging Technologies 2020, published jointly by the World Economic Forum and Scientific American magazine, states, “A new approach holds the promise of reducing the emissions of fossil fuels by using sunlight to convert waste carbon dioxide into useful chemicals.” Such game-changing technological innovations create favorable conditions for China to getrid of the outdated energy structure upgrading.

6.4 Foster Green Cooperation Under the Belt and Road Initiative and Jointly Build a Green Silk Road We will further deepen reform, promote high-standard opening up, and continue to bring vitality to development. This is important for responding to changes in the external environment and unleashing vitality for industrial development. The achievements of industrial development are made through reform and opening up. We must further deepen reform and opening up, so as to make new progress in the 14th Five-Year Plan and make China an industrial powerhouse. We will keep the proportion of the manufacturing industry basically stable, take measures to reform the market-based allocation of production factors, strengthen the guiding role of industrial policies, and make manufacturing more appealing to resource factors. We will promote the integration of reform and development, ensure efficient linkage, open up wider to the outside world, remove restrictions on the general manufacturing sector, greatly lower the threshold of market access, make better use of the domestic and international markets as well as resources, create a more innovative, safe and controllable industrial chain with higher added value, and make industries more competitive in international cooperation and competition. We will attract more institutions and professionals to China for development, encourage competent Chinese enterprises to increase business overseas, and deeply integrate into the international industrial chain, value chain, supply chain and innovation chain. Economic globalization and

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the international specialization in the industrial chain are irreversible trends. We will jointly implement the Belt and Road Initiative, foster international cooperation in the industrial chain, and promote the efficient linkage and mutual promotion of interplay between domestic circulation and international circulation. We will open up more sectors of the economy in a more thorough fashion to more countries, promote a stable increase in imports and exports, ensure unimpeded international logistics, and steadily increase the quality of foreign trade and foreign investment. We will increase credit support for small and medium-sized foreign trade enterprises, expand the coverage of export credit insurance, give full play to the role of insurance in risk prevention and control in advance as well as timely economic compensation ofter the event, and deepen the pilot program of facilitating foreign exchange receipts and payments in foreign trade. We will participate in the reform of the global economic governance system. We will promote the highquality implementation of the Belt and Road Initiative, build a global network of high-standard free trade zones, and secure greater international space for China’s development.

References Chao Qingchen, “Academic Basis of Global Climate Governance and the Challenges and Opportunities for China”, Yuejiang Academic Journal, No. 1, 2020. Chen Ying, “Profound Social and Economic Transition under the Carbon Neutrality Goal: Global Climate Change and China’s Action Plan: China’s Climate Governance During the 14th FiveYear Plan Period (Written Discussion)”, Yuejiang Academic Journal, No. 6, 2020. “Chinese version of Completing the Picture: How the Circular Economy Tackles Climate Change officially released”, ditan360.com, October 23, 2019. Pan Jiahua, “Carbon Neutrality: Keep to the right path [Data from the National Forestry and Grassland Administration: China Forest Resources Census Report (2019)]”, China Carbon Neutrality Forum, May 8, 2021. Pan Jiahua, Zhuang Guiyang, Chen Yingchun, “Economic Analysis of Climate Change Mitigation”, China Meteorological Press, 2003, pp. 119–150. The “Three North” areas refer to the northeast, North, northwest of China, with strong wind power and abundant wind energy. The English name is ‘audit’. The Chinese term “ 审核 ” is used to avoid confusion with economic audit. Wang An, “Systematic Analysis of High-quality Development of Coal Industry under the New Development Pattern”, China Coal, No. 12, 2020. “Xi Jinping made important instructions on the completion and operation of Shenhua Ningxia Coal coal-to-oil demonstration project, stressing the need to promote energy production and consumption revolution, and enhance China’s capacity for energy independence, People’s Daily”, December 29, 2016. Zhang Jiaxin, “Top Ten Emerging Technologies in 2020 Announced! Each brings game-changing changes to our lives”, Science and Technology Daily, November 15, 2020.

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Zhongshang Industry Research Institute, “Analysis of the Number and Distribution of National Development Zones in 2019 (Picture)”, June 18, 2019. www.askci.com. Zhou Hongchun et al., “Pioneer and Innovate to Achieve China’s Emission Peak and Carbon Neutrality Goals, Urban and Environmental Studies”, No. 1, 2021. Zhou Hongchun, Li Changzheng, Zhou Chun, “Thoughts on Energy Development Strategy in the Context of Carbon Neutrality”, China Coal, No. 5, 2021.

Chapter 4

Energy Base for Carbon Peaking and Carbon Neutrality Zhuang Guiyang and Dou Xiaoming

At present, the world has basically reached a political consensus to promote economic and social transition, say no to resource dependence, and move towards carbon neutrality. China’s “dual carbon” goals not only are intended to protect the environment, but also dovetail with the UN Sustainable Development Goals, Long-Range Objectives Through the Year 2035, the second centennial goal, etc., as well as meet the essential requirement of the paradigm shift of social-economic development. Han Zheng, a member of the Standing Committee of the Political Bureau of the CPC Central Committee and Vice Premier, stressed that “we must respect the law, seek truth from facts, base ourselves on reality in everything we do, and keep a scientific pace of work” in the process of achieving carbon peaking and carbon neutrality. We can conduct targeted emission reduction actions and improve efficiency by analyzing the essential issues of carbon peaking and carbon neutrality, and comprehending the economic logic of energy saving and carbon reduction.

Z. Guiyang (B) Research Institute for Eco-civilization, Chinese Academy of Social Sciences, Beijing, China e-mail: [email protected] D. Xiaoming Department of Eco-civilization Research, University of Chinese Academy of Social Sciences, Beijing, China High-quality Development Research Center, Beijing Academy of Science and Technology, Beijing, China e-mail: [email protected] © China Financial & Economic Publishing House 2023 G. Zhuang and H. Zhou (eds.), China’s Road to Carbon Peaking and Carbon Neutrality, https://doi.org/10.1007/978-981-99-3122-4_4

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1 The “Dual Carbon” Goals Featuring Energy Transition Carbon peaking and carbon neutrality necessitate holistic, systematic, and overall changes in the economy and society. All sectors will have extensive and profound connections through the energy and power system. Experts such as Du Xiangwan and Shu Yinbiao, academicians of the Chinese Academy of Engineering, and Zou Caineng, an academician of the Chinese Academy of Sciences, pointed out that energy is the driver of social-economic development, an important material basis for national social-economic development, and also the target area for carbon dioxide emissions reduction. It concerns national security. The energy transition is an effective means for achieving the “dual carbon” goals, and it also necessitates reforming the form of production and organization. It can be said that the issue of carbon peaking and carbon neutrality is essentially an energy issue. The revolution in energy consumption, energy production, energy technology, and energy system as well as international cooperation in energy are closely associated with the achievements of energy conservation and carbon reduction.

1.1 The Relationship Between Social-economic Development, Energy Consumption and Carbon Dioxide Emissions Energy is the foundation and driver of social-economic development. Major changes in the social mode of production to date have been closely related to the changes in the energy resources chiefly used by human beings in their work and life. About 11,000 years ago, Upper Cave Man evolved from “living the life of a savage” to the “age of plant energy” as a result of the practice of “drilling wood to make fire”. In the eighteenth century, the invention and use of machines in the Industrial Revolution required extensive use of coal as the driving force, and mankind had since entered the “coal age”. With technological progress, oil and natural gas were discovered and fixed, ushering in the “era of oil”. Now, the utilization of renewable energy sources such as wind power, solar power and hydropower will gradually inaugurate a diversified “era of new energy”, promoting the human society to move from industrial civilization to ecological civilization. Each social and economic advancement places higher demands on the quantity, stability and security of energy supply. On the one hand, a stabler supply of energy with higher calorific value supports the large-scale industrial production of machines. Progress in social productivity ultimately improves the social mode of production and meets the people’s needs for a better life. On the other hand, as urbanization deepens, more and more people live in cities, and electrification separates the terminal consumption of energy from the initial energy supply. The socialized division of labor makes energy supply more efficient, facilitating people’s work and life. Energy revolution and social-economic development complement each other.

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Currently, the vast majority of countries in the world use fossil fuels as primary energy resources. Fossil fuels refer to hydrocarbons caused by deposited fossils of ancient organisms or their derivatives, and their burning produces greenhouse gases such as carbon dioxide, including the primary energy of coal, oil and natural gas. Despite the fact that natural gas is characterized by a simple refining process, lowpolluting extraction, production and transportation, as well as high calorific value, this clean energy source only has a low level of carbon emissions, but not zero emissions. According to the data from the International Energy Agency (IEA), in 2018, the combustion and use of coal caused about 44% of carbon dioxide emitted, oil accounted for 34%, natural gas accounted for about 21%, and other energy resources accounted for less than 1%. When fossil energy such as coal, oil, and natural gas accounts for a high proportion of the energy structure, human beings will consume energy and emit greenhouse gases such as carbon dioxide in every aspect of their work and life. According to the BP Statistical Review of World Energy (2020), global fossil energy accounted for over 80% of primary energy in 2019 (see Table 3.1). The proportion of fossil fuels and nuclear energy gradually decline in the global electric power generation structure, but by the end of 2019, their share still exceeded 70% (see Table 3.2). Specifically, coal accounted for 27% of primary energy; oil is the fossil fuel variety with the highest consumption in the world, accounting for 33.1%, and natural gas accounted for 24.2%. How is the carbon dioxide emitted by human activities calculated? Regrettably, China lacks unified standards for measuring carbon emissions, and has not yet addressed the issues such as carbon emission base, caliber, and verification standards. We lack detailed data on fossil fuel consumption, and there is no regular publishing of official or authoritative basic data. As a consequence, China lacks accurate data on carbon emissions, which is inconsistent with the measurable, reportable Table 3.1 Share of primary energy and contribution to growth in 2019 Energy variety Energy consumption (EJ)

Annual change (EJ)

Proportion in primary energy (%)

Change in share compared to 2018 (%)

Oil

193.0

1.6

33.1

−0.2

Natural gas

141.5

2.8

24.2

0.2

Coal

157.9

−0.9

27.0

−0.5

Renewable energy

29.0

3.2

5.0

Hydropower

37.6

0.3

6.4

−0.0

Nuclear energy

24.9

0.8

4.3

0.1

583.9

7.7

–

–

Total

0.5

SourceBP Statistical Review of World Energy (2020)

Note (1) EJ is a thermal unit, and 1 EJ equals to 1018 J (2) Renewable energy does not include hydropower but includes biomass energy.

Ocean power generation (%) 20.3

21.7

Source IEA, Electricity Market Report 2020, China Power network, July 2020

Subtotal

22.1

0.4

Geothermal power generation (%)

Concentrated solar power generation (%)

0.7

2.9

Photovoltaic power generation (%)

5.2

16.4

77.9

23322

2013

1.8

5.0

16.5

78.3

22668

2012

Biomass power generation (%)

Wind farms (%)

15.3

Renewable energy generation

79.7

Hydropower (%)

22126

Total global generating capacity (TWh)

Fossil fuels and nuclear energy (%)

2011

Year

Table 3.2 Global electric power generation structure from 2011 to 2019

22.8

0.4

0.9

1.8

3.1

16.6

77.2

23816

2014

23.7

0.4

1.2

2.0

3.6

16.6

76.3

24176

2015

24.5

0.4

1.5

2.0

4.0

16.6

75.5

24957

2016

26.5

0.4

1.9

2.2

5.6

16.4

73.5

25677

2017

26.2

0.4

2.4

2.2

5.5

15.8

73.8

26615

2018

27.3

0.4

2.3

2.2

5.9

15.9

72.7

27005

2019

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Table 3.3 List of indicator coefficients in the IPCC guidelines Fuel category

Coal

Natural gas

NCV (KJ/ kg)

20908

38931

CEF (kg/ TJ)

95333

56100

Coke

Fuel oil

Gasoline

Kerosene

Diesel

28435

41816

43070

43070

42652

107000

77400

70000

71500

74100

Source Liu Chuanming, Sun Zhe, Zhang Jin, “Research on the Effect of Carbon Emission Reduction Policy in China’s Carbon Emissions Trading Pilot Program”, China Population, Resources and Environment, No. 11, 2019

and verifiable principles for climate governance. Generally, the quantitative relationship between energy consumption and carbon dioxide emissions is calculated based on the idea that “carbon emissions are equal to the product of economic activity and corresponding emission factors”. According to the 2006 IPCC Guidelines for National Greenhouse Gas Inventories, emission sources of greenhouse gases such as carbon dioxide primarily include energy, industrial production processes, agriculture, change in land use, forestry, as well as rejected materials. In terms of energy, carbon dioxide emissions are estimated by multiplying fossil fuel consumption, calorific value, and emission factors. Common formulas for measurement of carbon dioxide and coefficients are as follows: C O2 =

7 

E i × N C Vi × C E Fi

i−1

where, CO2 represents an estimate of carbon dioxide, i represents the fossil fuel category, E represents fossil fuel consumption, NCV represents average lower calorific value, and CEF represents carbon emission coefficient. The specific values are shown in Table 3.3.

1.2 Relationship Between Climate Change, Energy and National Security One of the purposes of carbon peaking and carbon neutrality is to reduce the total carbon emissions and curb climate change, an issue characterized by global warming. The increase in atmospheric CO2 concentrations and other factors give rise to this problem, and exert a negative impact on natural ecosystems as well as social and economic systems. As a key component of the economic and social system, energy has a two-way influence relationship with climate change. As shown in Fig. 3.1, the burning of fossil fuels leads to an increase in GHG emissions such as carbon dioxide, resulting in climate change, which also affects various stages in the value-

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Fig. 3.1 Logical relationship between carbon dioxide emissions (emission reductions) and climate change (Note A dotted line indicates that this link does not exist Source [U.S.] William Nordhaus: The Climate Casino, translated by Liang Xiaomin, Oriental Publishing Center, 2019 edition)

added chain of the energy sector. Extraction and transportation of raw materials, energy production, transmission, and consumption are all affected by climate risks. Moreover, the impact of each stage has a cascading effect, undermining social and economic security as well as development at a fast speed.

1.2.1

Climate Change Affects Energy Supply

On the supply side, energy production and transmission are the most susceptible to climate change. Even short-term malfunction of energy infrastructure can cause serious repercussions for society. In terms of energy production and in the case of renewable energy, new energy production equipment such as solar panels and wind turbines is highly susceptible to climatic conditions. Wind velocity and direction affect wind power generation, sunshine hours restrict the development and utilization of solar power, and changes in river flows also affect the safe operation of hydropower. In terms of conventional energy sources, continuous warming leads to a decrease in the efficiency of thermal power generation capacity, largely because the cooling water used for power generation methods such as hard coal power generation, gas power generation and nuclear power is primarily obtained from rivers. The cooling quality is directly linked to the river water temperature, which is influenced by climate change. In March 2021, the central and southern United States suffered extremely cold weather, which left millions of residents without power and heating, and more than 20 people died in heating-related fires or traffic accidents. When the U.S. state of Texas suffered a cold wave, wind turbines were frozen, and natural gas, the most critical source of power generation, was frozen in the pipeline. This placed havoc with the Texas power grid due to a lack of emergency plans.

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High-voltage electricity facilities are extremely vulnerable to extreme weather events such as hurricanes, floods, and thunderstorms in the process of energy transmission. These pose a great threat to the security and stability of energy networks. In the event of frequent extreme weather events, power distribution facilities exposed above the ground are extremely susceptible to physical damage. Extreme temperatures even change some physical properties of transmission networks, undermining the energy transmission efficiency.

1.2.2

Climate Change Affects Energy Demand

Changes in summer and winter temperatures have an impact on the use of refrigeration and heating facilities. Consumers can adjust the categories of energy they use and the amount of energy they consume in a particular category. The selection of energy category is highly correlated with the type of local energy demand. For example, in areas with high temperatures, users have higher demands for electrically powered air conditioning, but are unwilling to invest in gas and fuel-powered heating equipment. In terms of demand for different types of energy, a warmer winter will only slightly reduce the consumption of gas and fuel oil, but a warmer summer will drastically increase the consumption of electricity. This means that warming will remarkedly increase the total demand for energy if the temperature rises by a comparable amount throughout the year.

1.2.3

Energy Issues Affect National Security

China’s latest commitment to carbon peaking and carbon neutrality not only means to tackle climate change, but also is a strategic plan made from the perspective of longterm and healthy social-economic development. Since energy has a vital bearing on the lifeline of the national economy, the energy transition concerns climate security, and its impact on energy security also affects national security to a large extent. Contrary to traditional knowledge, China is not rich in energy resources, and is highly dependent on foreign countries for fossil energy such as oil and natural gas. In 2019, China ranked first in the world in terms of oil imports, with a foreign dependence ratio of up to 72%; China, and was dependent on foreign countries for more than 40% of its natural gas use. Because China doesn’t have total control over the energy supply, it brings great uncertainty to its energy security. Under the global trend of “de-coaling”, energy imports are affected by geographical, political and economic patterns. As China’s energy consumption rapidly grows, Western countries spread the “China energy threat theory”, which undermines the energy cooperation between energy-exporting countries and China, and raises China’s fear of energy supply interruption. In addition to complete control over renewable energy supply, the diversity of energy supply sources, varieties and methods is important for ensuring the stable and long-term energy supply. In order to ensure national energy security

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and establish a completely independent energy system, it is a sure choice to develop renewable energy. In recent years, the focus of global competition for energy has shifted, with competition for energy resources being gradually replaced by competition for energy markets. The division of the world energy pattern in the future will be no longer based on natural resource endowments, but will be determined by the level of technological development, application and promotion. Whether we can seize the initiative in the future competition for the global energy market, move away from the political and economic pattern featuring traditional fossil energy, and redistribute the world economic dominance is determined by the progress in energy technologies.

1.3 Economic Logic Behind Carbon Peaking and Carbon Neutrality as Well as Energy Transition The achievement of the “dual carbon” goals is a process of moving from relative decoupling between economic growth and carbon dioxide emissions to their absolute decoupling. China chooses to move towards the “dual carbon” goals through decarbonization not only because fossil fuel’s carbon emissions account for about 73% of China’s carbon emissions, but also because in the decarbonization process in China, it is relatively less costly to develop renewable energy. There are three interconnected paths with potential towards carbon neutrality: energy transition, negative emission technologies such as CCUS, and forests as carbon sinks. However, due to the limited forests as carbon sinks and the great uncertainty in the development of negative emission technologies, energy transition is a decisive factor in whether and at what cost the “dual carbon” goals can be achieved. The low-carbon energy and electric power system driven by new energy electricity is expected to reduce CO2 emissions by about 70% at a relatively low cost in China. Wind power and photovoltaic power address the plan of the initial 50% of carbon reduction at a cost of about US$220 billion per year. Subsequently, clean hydrogen energy is expected to achieve 20% of decarbonization, but primarily in the industrial and heating sectors. After that, China enters a period of high-cost decarbonization. The annual cost for achieving 90% of decarbonization may be up to some US$180 million without taking into account natural carbon sinks and negative emission technologies, geoengineering technologies, and so on. Models of production that are chiefly used for industry and cannot be decarbonized will rely on negative emission technologies as well as carbon sequestration related to non-industrial processes, including forests as carbon sinks and direct air capture (DAC). Regarding the issue of how to achieve carbon neutrality, some views emphasize reducing non-CO2 greenhouse gas emissions and boosting the capacity of forests as carbon sinks. On the one hand, non-CO2 greenhouse gases are small in volume and exist for a short time in the atmosphere. As long as the increment is strictly controlled, non-CO2 greenhouse gases have a small impact in the long term. On the

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other hand, the chief function of forest plants is not to provide carbon sinks, but to provide biomass. Biomass energy is a type of renewable energy, and the carbon dioxide released during its burning comes from the carbon sequestered by green plants through photosynthesis. It is only equivalent to completing a carbon cycle in a short period. It must be clearly realized that forests are indeed essential to the health of the planet, but there will never be enough trees to offset carbon emissions. Since photosynthesis requires a peculiar ratio of carbon dioxide, nitrogen, and phosphorus, the capacity of the Earth’s terrestrial ecosystems for carbon storage is limited. This is chiefly attributed to the following three reasons. First, the Earth’s terrestrial ecosystems, as scientists estimate, can absorb 40 billion tons to 100 billion tons of carbon from the atmosphere, but the world is emitting carbon dioxide into the atmosphere at a rate of 10 billion tons of carbon per year. The natural processes can barely keep pace with the greenhouse gases emitted by the global economy. In China, the China Report on Forest Resources Census published by the National Forestry and Grassland Administration in 2019 shows that China’s total forest carbon sinks reach 434 million tons per year. If converted into carbon dioxide, it is only 1.2 billion tons, which is a drop in the bucket compared with the unified greenhouse gas emissions of 14 billion tons. Second, the frequently seen numbers in the news about forests as carbon sink often refer to the sum of natural carbon sinks and increased carbon sinks from anthropogenic activities, rather than just sinks increased by anthropogenic activities such as afforestation and forest management. Therefore, the amount of forest carbon sinks that the carbon neutrality targets focus on may actually be a smaller number. Third, instead of reducing carbon dioxide levels, inappropriate tree planting will even pose a potential risk of damaging local ecosystems. In the long term, the green plants in agriculture and forestry are climateneutral carbon. In other words, they are both carbon sinks and carbon sources. China’s Intended Nationally Determined Contributions (INDC) goals also confirm the path to achieving the “dual carbon” goals mainly through energy transition. The cooperation model of “putting forward nationally determined contributions in light of each country’s social-economic development as well as the willingness to reduce emissions, and then voluntarily adjusting contributions according to the results of the global inventory” is the paradigm for each country and region to fulfill their commitments in response to climate change after 2020 as laid down in the Paris Agreement. It is also the basic framework for countries and regions to honor commitments to carbon neutrality. The INDCs submitted twice by China set requirements for the proportion of non-fossil energy in primary energy consumption. The updated INDCs further clarify the targets for the installed capacity of non-fossil energy on the production side. This somewhat illustrates the importance of the energy transition to the “dual carbon” goals as well as its potential contribution. It also shows that China’s international commitments to carbon peaking and carbon neutrality are consistent with the detailed targets of INDCs.

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1.4 Inspiration from Industrialized Countries on Carbon Peaking and Carbon Neutrality Carbon peaking often occurs first in advanced economies, and this shows a uniform pattern. Judging from past experience, there is often a trend of “double peaking” and “double decline” in energy consumption and carbon dioxide emissions. The key to promoting carbon peaking is to focus on the consumption proportion of energy, especially renewable energy.

1.4.1

Germany Legislates to Promote the Marketization of Power Generated by Renewable Energy

Germany began to issue energy plans in the 1970s and is now vigorously moving towards carbon neutrality target by 2050. Germany’s coal consumption decreased year by year after 1990, and its consumption in 2019 fell to half of that in 1990. Renewable energy consumption has significantly expanded since the early 21st century, and fossil energy is being phased out as the primary energy source. In 2019, Germany’s renewable energy-based generating capacity accounted for 46% of its total generating capacity, exceeding fossil energy for the first time. Germany has gained rich experience in terms of legislating to promote carbon reduction, the development and utilization of renewable energy, and so on. In January 1991, Germany promulgated the Electricity Feed-In Law to promote wind energy utilization, the development of solar cells and other industries through favorable fiscal policies such as loans and subsidies. In March 2000, Germany enacted and promulgated the Renewable Energy Act, which set out the incentive policy for renewable energy featuring fixed feed-in tariffs, and made amendments many times. The core of the Renewable Energy Act is the feed-in tariff system, which spurs the development of renewable energy through policies such as fixed electricity prices, compulsory grid access, and full-amount purchase. In addition to adjusting the feed-in tariff incentive mechanism, it controls renewable energy power generation subsidies, introduces the bidding system, and promotes market-oriented renewable energy power generation in an all-round manner. In 2020, Germany announced an amendment to the Renewable Energy Act to promote the use of renewable energy in the electricity market. Germany is now moving faster to enact the Coal Exit Law, proposing to shut down coal-fired power plants by 2038 at the latest, striving to stop using coal by 2035, and deciding to shut down 17 nuclear power plants in operation stage by stage by the end of 2022.

1.4.2

The UK Leverages Market Forces to Promote coal’s phase down

In 2003, the British government announced the development of a “low- carbon economy” for the first time. Renewable energy consumption rose sharply accordingly,

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behind only oil and natural gas. Britain has decided to phase out coal-based power by 2025 and write carbon neutrality into law. Unlike Germany, which finds it hard to shut down coal-fired power plants in the short term, Britain has made achievements in de-coaling through both renewable energy and better flexibility of power scheduling. Between 1990 and 2019, the UK’s greenhouse gas emissions plunged by 90% primarily in the following aspects: 40% due to “de-coaling” of electricity, 40% due to cleaner industry, and 10% due to the smaller, cleaner fossil fuel supply sector and the decrease in natural gas transmission pipeline leakage. The UK’s emissions reduction is mainly achieved through the electric power sector. Coal accounted for just 1.6% of electricity generation in 2020 and three was no coal- based power supply for nearly half of the year. Natural gasbased generating capacity also fell by 15%. At the same time, the UK has significantly scaled up the capacity of wind farms, solar energy parks and bioenergy plants, and decided to continue to use nuclear power. The share of renewable energy- based generating capacity (43%) exceeded that of fossil fuels in 2020 for the first time. Market forces have been a key support for the energy transition in Britain. Britain has introduced a new electricity trading mechanism to gradually lower electricity prices. The carbon market is one of the core vehicles for emissions reduction. Britain piloted the world’s first national emissions trading scheme from 2002, and also spearheaded the establishment of the EU emissions trading system.

1.4.3

The U.S. Relies on the Industrial and Resource Base to Optimize Energy Efficiency and Energy Consumption Structure

The achievements of the U.S. in emission reduction can be boiled down to two aspects: First, energy efficiency keeps improving, that is, energy consumption per unit of GDP continues to decline. This ensures that the economy grows steadily while energy consumption is falling. Second, the energy structure is being optimized. Since 2016, natural gas has become the biggest energy source for power generation in the U.S., while coal use for power generation declines rapidly, which greatly promoted carbon peaking in the United States. In 2019, renewable energy overtook coal for the first time and became the third largest energy source, which is a landmark in the adjustment of the U.S. energy structure. It is noteworthy that improving energy efficiency and optimizing consumption structure inevitably involve the issue of cost. A sound industrial and resource base is needed to ensure energy security and economic security.

2 Current Situation of China’s Energy Transition Energy is the principal source of carbon emissions in China, accounting for approximately 88% of total carbon dioxide emissions. Of this, the electricity sector accounts for about 41% of the total emissions in the energy sector. China has long been

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aware of the key role of energy in economic growth and environmental protection, and has consistently used laws and other government decrees to guide the development orientation of energy. After China officially set the energy target measured by “carbon emissions per unit of GDP”, energy policies further focus on the direction of energy conservation, and pollution and carbon emissions reduction oriented to climate change response.

2.1 The Evolution of Energy Planning Oriented to “Energy Conservation, and Reduction of Pollution and Carbon Emissions” The promulgation of the Environmental Protection Law of the People’s Republic of China (Trial) in 1979 marked the shift of the key tasks of China’s energy policy from simply ensuring the safe energy supply to considering environmental constraints. China’s energy policy focused on reducing atmospheric pollution and supporting hydropower development since the early 1980s, while the policy tools to reduce CO2 emissions and support technologies for renewable energy such as wind and solar energy have largely been implemented since the Tenth Five-Year Plan (2001–2005) period (see Fig. 3.2). Thereafter, the intensity and diversity of policy tools have been greatly enhanced. Starting with China’s campaign to reduce carbon emissions per unit of GDP in 2009, energy development has been subject to environmental protection, and the synergy governance of energy environment and climate began. China’s energy policy subject to environmental constraints primarily includes the following three interrelated directions with different focuses: First, reduce emissions of greenhouse gases such as carbon dioxide under the existing coal-based energy system. Second, promote renewable energy technologies. Third, control environmental pollution such as atmospheric pollution. The requirements for energy development at this stage are: to meet the demand of social-economic development for a safe energy supply, and to be constrained by environmental protection and response to climate change. Carbon dioxide emissions and atmospheric pollution are “of the same origin”. It is expected that during the 14th Five-Year Plan period, atmospheric smog control and reduction of pollution and carbon emissions will be further integrated, while the 15th FiveYear Plan period will focus more on climate action such as promoting air pollution prevention and control through carbon governance. At this stage, China, on the basis of its previous achievements, works to build a clean, low-carbon, safe and efficient energy system, control the total quantity of fossil energy, improve the utilization efficiency, implement a renewable energy substitution campaign, further reform the electric power system, and build a new-type power system featuring renewable energy. However, there is a lack of laws, regulations and policies concerning new energy, market regulation, and power safety regulation. There are also potential problems that rules and normative documents lack binding force.

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Fig. 3.2 The evolution history of the goal program of China’s environmentally oriented energy policy (Source Lili Li, Araz Taeihagh. “An In-Depth Analysis of the Evolution of the Policy Mix for the Sustainable Energy Transition in China f rom 1981 to 2020.” Applied Energy, Volume 263

2.2 Achievements and Problems in China’s Fossil Energy Control After long-term adjustment of energy supply, consumption, technology as well as systems and mechanisms, the growth of energy consumption reaches a plateau despite an increase in the total consumption amount. In the past 10 years, China’s energy consumption level per unit of GDP fell from 0.86 tons of standard coal per 10000 yuan to 0.49 tons of standard coal per 10000 yuan. The main problem in the control of fossil energy consumption primarily exists in the coal industry, whereas the demands for oil and natural gas are to lay a solid foundation for resource supply. Coal’s share in the energy consumption structure fell from nearly 70% in 2010 to 56.8% in 2020 (see Table 3.4).

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Table 3.4 Overview of China’s energy consumption Indicator

2010

2015

2020

Total energy consumption 10,000 (tons of standard coal)

36068

434113

498000

Energy consumption per unit of GDP (Tons of standard coal per 10,000 yuan)

0.86

0.63

0.49

Energy consumption structure: Coal (%)

69.2

64

56.8

Oil (%)

17.4

18.1

18.9

4

5.9

8.4

9.4

12

15

Natural gas (%) Non-fossil energy (%)

Source 13th Five-Year Plan for Energy Development, China Statistical Yearbook 2020

2.2.1

Achievements of Fossil Energy Control

First, total energy output has been brought under control. China strictly controls the approval of new coal and coal-fired power generation projects. Greater efforts were made to close down outdated production capacity as well as production capacity that did not conform to industrial policies during the 13th Five-Year Plan period. Decrease and replacement were implemented for new coal mines that were really needed. A number of coal mine production capacity and coal-fired power generation projects were stopped, delayed or withdrawn, and coal-fired power plants were transformed. According to statistics, more than 30 million kilowatts of backward coal-fired power plants were shut down during the 13th Five-Year Plan period. Second, energy supply is developed through the construction of large coal bases and comprehensive energy bases. The long-term pressure of energy supply assurance was basically relieved during the 12th Five-Year Plan period. During the 13th Five-Year Plan period, great efforts were made to resolve and prevent excessive production capacity, and further optimize the distribution of energy development. China controlled the development of large-scale energy bases in areas rich in energy resources within a reasonable scale, and also made rational plans for natural gas distributed energy projects, peak shaving power stations, sales networks and service facilities. At the same time, we increased efforts to flexibly regulate peak shaving for cogeneration units and thermal power generating units, and improved the peak shaving performance of power systems. We leveraged the combined advantages of large-scale comprehensive energy bases, and promoted the construction of projects in which multiple types of energy complement. The proportion of production capacity by large-scale modern coal mines increased significantly. Third, coal-fired power generation is no longer the principal environmental polluter in China. China’s energy and power sector is moving towards electrified, lowcarbon and intelligent development through transition. Because renewable energy power sources are characterized by obvious volatility, and because key energy-using sectors such as construction and transportation embrace electrification on a large scale, the characteristics of demand-side power loads have changed dramatically, and the electric power system must install “green coal-based power” with negative

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emission technology to play a role in flexibly regulating the peaks and valleys of electricity consumption. During the 13th Five-Year Plan period, coal-fired power plants totaling 890 million kilowatts nationwide achieved ultra-low emissions, and the world’s largest ultra-low-emission clean coal-based power supply system was established. By the end of 2019, 86% of coal-fired power plants had achieved ultralow emissions, and the cumulative emissions of principal air pollutants such as soot, sulfur dioxide and nitrogen oxides in the electric power sector had decreased by about 2.19 million tons compared with 2015. Fourth, the system of the power sector is steadily reformed towards adaptation to the complementarity of multiple types of energy, microgrid “Internet + ” smart power supply, digital development and demand-side management. At the current stage, China’s power system has the characteristics of planning and market economy, and power dispatching is primarily in the charge of provincial governments and provincial dispatching agencies in accordance with administrative procedures under the principle of fair dispatching. Trading in renewable energy, especially across provinces and regions, is encouraged in the electricity market. Nuclear and renewable power generation has the highest priority in dispatching. Benchmark feed-in tariffs and the “coal price and electricity price linkage” mechanism were implemented to subsidize wind power and photovoltaic power generation. Fifth, the reduction of coal consumption and the expansion of the natural gas consumption market are promoted at the consumption end. Coal reduction and its replacement of alternative energy sources are implemented in the Beijing-TianjinHebei Region, the Yangtze River Delta, the Pearl River Delta and other regions, while the replacement of coal by an equal amount of alternative energy sources is implemented in other key areas. Comprehensive treatment of low quality coal is implemented across the board. Significant progress has been made in this regard through activities such as clean energy substitution for low-quality coal for civilian use, and the upgrading of industrial coal-fired boilers and kilns. At the same time, the reform of natural gas prices was deepened to ensure the supply and utilization of natural gas. Structural reform measures such as “independent pipelines and separation of transportation and marketing” have been implemented. The market-oriented reform of natural gas is conducted in accordance with the principles of “pilot before promotion”, “non-residential use before residential use”, “increment before stockpiling”, and “rationalizing and opening up” under the main ideas of “control of the middle sector and no restrictions at both sides”.

2.2.2

Problems in Fossil Energy Control

First, the early shutdown of coal-fired power plants may trigger the risk of stranded assets. To achieve the “dual carbon” goals, China must move faster to shut down coal-fired power plants to achieve deep emission reductions. The average service life of coal-fired power plants in China by 2020 is about 12 years, which is half the global average service life. Moreover, the majority of coal-fired power plants were put into operation in the past 15 years, with a remaining service life longer than those in

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Europe and the United States. The rapid decommissioning of coal-fired power plants may prompt changes in investment returns as well as trigger the risk of stranded assets, all of which may adversely impact economic indicators such as regional investment and fiscal revenues. Because investment in power plants primarily is raised through financing channels such as banks, systemic financial risks may occur. Second, the parties concerned are debating the orderly withdrawal of coal- fired power plants. According to the financial cost accounting of the existing coal-fired power generation projects in 2019, nearly 70% of the country’s coal- fired power plants may be operating at a loss. If coal-fired power generation is gradually phased out by means of early decommissioning, reduced generating hours, etc., coal-fired power generation sector will sustain greater losses. The administrative approval power for coal-fired power generation projects has long been delegated to provincial governments. In order to drive investment and stimulate the economy, many regions still launch coal-fired power generation projects when the loss of the coal-fired power generation industry is up to 50%. Coal-fired power generation projects are promoted in various places without overall planning, and investors are driven by profits. As a result, the problem of overcapacity for coal-fired power generation has not been completely solved. Third, the market prospect of the coal chemical engineering industry as a coal industry is uncertain. Coal has the dual attributes as an energy resource and material resource, and only about 7% of coal in China is utilized in the coal chemical engineering industry, which is a low proportion. The quality and cost of coal chemical engineering products are not competitive in the market. There is a surplus of lowquality products, and the trend of homogeneous competition becomes prominent. Due to weaknesses in technology integration and production management, the cost of modern coal chemical engineering products is high, and the corporate operation efficiency as a whole must be improved. Under the carbon peaking and carbon neutrality goals, coal chemical engineering products such as coal-based oil and methanol have no market, and it is impractical to replace oil and natural gas with coal-based oil and coal-based gas. Coal chemical engineering projects are characterized by huge investment, and large consumption of coal and water. There are many primary products but few downstream products, making its industrial competitiveness undercomplete. Fourth, the reversal of the development trend of the coal sector creates pressure on employment. Controlling coal production and consumption inevitably reduces the demand for labor. At the same time, the trend of the expanding coal industry in China means a higher level of mechanization, which causes far more layoffs than the elimination of outdated production facilities. It is estimated that coal-related jobs will fall to less than three million in the mid-twenty-first century, so as to achieve carbon peaking and carbon neutrality goals. The unemployment pressure will persist for a long time. The “golden age” of coal in China had created surplus labor. The distinctive regional characteristics of coal production impose more obvious employment pressure on areas rich in coal resources. Due to a lack of funds and technology, it is difficult for coal-resource-based areas to develop emerging industries. And because laid-off workers with few skills are uncompetitive, it is difficult to place them.

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Fifth, the development of coal-fired power generation projects under the global carbon emission reduction goal comes under international public pressure. UN Secretary-General António Guterres said phasing out coal in the electric power sector is the most key step towards carbon neutrality. This means that the global use of coal in the field of power generation by 2030 must be reduced by 80% compared to 2010. Coal-fired power generation projects are condemned for their high carbon emissions. China’s total installed capacity of coal-fired power generation reached 1.08 billion kilowatts in 2020, more than those in all other countries put together. China’s coalfired power generation projects have attracted the attention and even questioning from the international community, whether for its domestic construction or overseas investment. As a global leader in tackling climate change, China falls short of the expectations of the international community in terms of emission reduction efforts. Greater efforts are needed to publicize China’s policies in the world.

2.3 The Current Situation and Potential Problems in Renewable Energy Development in China After over 40 years of reform and opening up, China has developed from the ground up in terms of renewable energy, and caught up with developed countries. Renewable energy has also evolved from being an alternative and supplement to traditional fossil energy to being the mainstream energy source that meets the future energy demand. Studies have shown that the development of renewable energy contributes nearly 30% of China’s carbon peaking goal by 2030, and contributes to China’s energy transition.

2.3.1

Current Situation of Development of Renewable Energy

First, China is in the stage of development of multiple types of energy including coal-based energy, electricity, wind energy and photovoltaic energy. The proportion of renewable energy in primary energy as well as its consumption has steadily increased. In 2019, coal consumption accounted for 57.7% of total energy consumption, and renewable energy consumption accounted for 15.3%, which achieved ahead of schedule the goal of non-fossil fuel consumption accounting for about 15% by 2020. The installed capacity and generation capacity of renewable energy increases steadily. Since the 13th Five- Year Plan period, the installed capacity of renewable energy grew by about 12% annually on average, and the proportion of new installed capacity in a year exceeded 50%. By the end of 2019, the total installed capacity of renewable energy-based power generation in China accounted for about 30% of the global total. China ranked top in the world in terms of the total installed capacity of hydroelectric generation, wind power generation, photovoltaic power generation and biomass power generation. The penetration rate of renewable energy (wind power

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and photovoltaic power) was 8.6%. The penetration rate of renewable energy in the east Inner Mongolia region exceeded that in world- class countries in renewable energy development. Renewable energy-based heating is widely used. By the end of 2019, the cumulative collector area of solar water heaters reached 500 million square meters, and the area of heating from shallow and medium-deep layer geothermal energy exceeded 1.1 billion square meters. Second, new energy represented by wind and solar energy becomes the mainstream, and conventional hydropower and pumped storage develop steadily. In 2019, the national average utilization rate was 96% for wind power and 98% for photovoltaic power, the utilization rate of hydropower in major river basins reached 96%, all reaching the leading level in the world. On the one hand, new energy has developed apace since the 13th Five-Year Plan, with the annual new installed capacity accounting for more than 80% of renewable energy. By the end of 2019, it accounted for 55.2% of the total installed capacity of renewable energy. The cumulative installed capacity of photovoltaic power generation in China reached 204.3 million kilowatts, and the installed capacity of new photovoltaic power generation was 30.11 million kilowatts, a year-on-year decrease of 31.6%. Of this, the new installed capacity of centralized photovoltaic power generation showed a downward trend, while the new installed capacity of distributed photovoltaic power generation increased by 41.3% year-on-year. In 2020, the cost of photovoltaic and wind power generation in China was lower than that of coal-fired power generation for the first time, giving an impetus to the replacement of coal with renewable energy. On the other hand, conventional hydropower plays a cornerstone role in the development of renewable energy. Because hydropower stations provide clean electricity, make the power system more flexible, and promote renewable energy consumption, they play a key role in poverty alleviation. Pumped storage is involved in peak-load shifting. It reduces the extent of peak regulation for thermal power in the system, and operates in coordination with wind, solar and nuclear power to ensure the safety and stability of the power system. Third, as the largest country in renewable energy, China has certain experience in investment, technological innovation, industrial implementation, etc. From 2010 to 2019, China made a total investment of US$2.6 trillion, becoming the world’s largest investor in renewable energy for seven straight years. In the field of renewable energy, China ranked first in the world in terms of the number of patents, and installed capacity and generating capacity of renewable energy. Equipment has been significantly improved, and the localized manufacturing of key components has basically been achieved. In 2019, China’s output of polysilicons, photovoltaic cells and photovoltaic modules accounted for about 67%, 79% and 71% of the world’s total output, respectively. By the end of 2019, China had 32 ultra-high-voltage (UHV) power transmission projects completed or under construction, and the length of UHV lines in operation and under construction was 38,000 km. A complete world-class industrial chain has been established. As emerging industries of strategic significance, renewable energy-related industries have become pillar industries in provinces and regions with abundant wind and solar energy resources such as Xinjiang, Inner Mongolia, and Gansu.

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2.3.2

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Potential Problems in the Development of Renewable Energy

The technical, institutional and economic problems confronting the development of renewable energy have attracted the attention of industry, universities and research institutes. The frequent occurrence of “abandonment of wind farms” and “abandonment of photovoltaic power” is a manifestation of a host of problems in renewable energy. The underlying reason is the limited consumption capacity. Some scholars reach a consensus that structural problems such as technical bottlenecks and institutional problems for renewable energy-based power generation pose pressure on the security and stability of China’s power grid as well as its economic costs. First, technical barrier. As renewable energy comes onto the grid on a large scale, we must solve the technical problems facing power supply, peak regulation, energy storage, and power grid construction in order to ensure the safe and stable operation of the power grid. In terms of power supply, renewable energy-based power generation and power electronics technology have been developed. It is difficult to make technical breakthroughs and the attention paid to research is not enough. In terms of peak regulation, as renewable energy such as solar, wind, tidal and biomass energy is obviously of an intermittent, random and volatile nature, there is a large peak-tovalley difference when connected to the power grid. Therefore, the complementarity of multiple types of energy is required to improve the stability of the power supply, and even a certain proportion of traditional fossil energy power needs to be connected when necessary. One way to solve the problem of peak shaving is to develop energy storage technology. In terms of energy storage, there is no effective energy storage technology, resulting in weak elasticity of demand. The developing energy storage technologies include heating energy storage, electromagnetic energy storage, and chemical energy storage. Renewable energy-based heating is not merely a way of energy storage. It is also an ideal alternative technology for coal burning during the heating period, because peak- load shifting can be achieved with the aid of smooth treatment of heat storage facilities. At present, the construction of power grids lags behind that of power sources, and the intermittent, random and volatile renewable energy-based power generation will directly impact the quality of power supply and the safe operation of the system when it is directly connected to the large power grid. At this stage, the power grid is out of keeping with the intermittent, random and volatile renewable energy-based power generation. This is also an obstacle to distributed power generation projects for grid connection. Furthermore, the few interprovincial lines, low load levels of power grids, and insufficient power of transmission channels also have a negative impact on external transmission capacity. In addition to the aforesaid problems, breakthroughs are urgently needed in technologies such as electric vehicle batteries, photovoltaic conversion and extension of wind turbine lifespan. The emerging technology of producing hydrogen through water electrolysis also faces a host of problems such as hydrogen energy storage, transportation and filling. Second, the problem of consumption will persist for a long time. In addition to the inflexible power system caused by technical and institutional problems, the high economic cost is also a significant obstacle to renewable energy consumption.

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The technology of peak regulation, energy storage, and power grid construction is a comprehensive issue. The regulation capacity of the power system is negatively impacted by a lack of accurate prediction and peak regulation plan for renewable energy-based power generation, and by inflexible construction at the production, transmission, energy storage and consumption sides. The consumption of renewable energy-based electricity faces institutional obstacles, and the structural problems of the power system are particularly prominent. First of all, all provinces (autonomous regions and municipalities directly under the central government) are self-sufficient in electricity, and there is even overcapacity, which impacts the market demand for renewable electricity. Second, the construction of power grids is incompatible with the development of renewable energy. On the one hand, renewable energy develops more than expected, but flexible power sources such as pumped storage, gas- fired power generation, and energy storage power stations are obviously underdeveloped, lagging far behind the plan. On the other hand, the grid dispatching model and economic policies are incompatible with renewable energybased power generation, making it particularly difficult for distributed projects to generate electricity for power grids. Third, the mechanism for trading among market entities and across provinces and regions is not perfect. China’s renewable energy resources and load centers are reversely distributed. Because of the high cost of electricity purchase, the contribution of local coal- fired power generation to GDP, the security of power supply, as well as the difficulty of grid coordination, consumption across provinces and regions is not the best choice for electricity receiving areas. Owing to the imperfect energy price system, renewable energy does not have a price advantage. According to the externality theory, the price of traditional fossil fuels is generally low and has a downward trend because the negative externalities of traditional fossil fuels are not shown in prices. At the same time, the marginal social benefits of renewable energy are not shown in prices, which will have a negative impact on the optimal allocation of resources in the long term. According to the “energy trilemma paradox”, only two of the three conditions of clean energy, safe and stable energy supply and energy price can exist. Energy security is indispensable for China’s development, and the goal of carbon dioxide emissions peaking necessitates clean and low-carbon energy development. As renewable energy comes onto the grid on a large scale, electricity prices will show an upward trend. When traditional fossil energy- based electricity is still used as an alternative, it will be an obstacle to the consumption of renewable energy-based electricity.

3 Direction of Energy Transition Toward the “Dual Carbon” Goals Carbon peaking and carbon neutrality are arduous and urgent tasks. Energy decarbonization plays a basic and critical role in achieving the “dual carbon” goals. Energy, economy, society and the environment are interrelated and mutually influence each

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other. In order to achieve the “dual carbon” goals, the energy sector needs to ensure the wellbeing of the affected populations and the surrounding communities while rapidly achieving low-carbon transition.

3.1 Low-Carbon Transition China’s carbon peaking initiative is to drive carbon dioxide emissions to peak and then decrease alongside the economic development. China’s carbon neutrality is the net zero greenhouse gas emissions after industrialization and urbanization are completed and the living standards of residents are significantly improved. A significant share of renewable energy is a fundamental measure to optimize the energy structure, and promote the low- carbon transition of the energy sector, thereby achieving the “dual carbon” goals as scheduled. In 1989, Japanese professor Kaya Yoichi proposed at an IPCC seminar that the impact of different factors on carbon dioxide emissions could be identified by linking factors such as economy, policy and population to carbon dioxide emitted by human activities through a simple mathematical formula. After further correction, it is believed that carbon dioxide emissions are equal to the continued product of GDP, carbon intensity per unit of energy and energy intensity per unit of GDP. This means that in addition to the direct control over total energy consumption, it will play a key role in the process of carbon dioxide reduction by controlling the energy consumption intensity per unit of GDP through replacing traditional fossil fuels with renewable energy and controlling the carbon emission intensity per unit of energy in technologically innovative ways. According to the Working Guidance for Carbon Dioxide Peaking and Carbon Neutrality in Full and Faithful Implementation of the New Development Philosophy issued by the CPC Central Committee and the State Council, China will move faster to build a clean, low-carbon, safe and efficient energy system, tighten the control of energy consumption intensity and total consumption, significantly improve the efficiency of energy utilization, strictly control fossil energy consumption, develop non-fossil fuels, and deepen the reform of the energy system and mechanism. The Action Plan for Carbon Dioxide Peaking Before 2030 also lists the “green and low- carbon energy transition initiative” as one of the “top ten initiatives for carbon peaking”. The above direction of energy adjustment is the focus for carbon peaking and carbon neutrality. Because China’s total energy consumption will still be on the rise in the foreseeable future and the industry has narrowing space for improving energy efficiency, the key to achieving carbon peaking lies in the development of renewable energy-based energy systems and the large-scale application of negative emission technologies such as CCUS. In the long run, the energy and power system featuring renewable energy will relax the restrictions on total energy consumption, while negative emission technologies and solar power generation engineering technologies will offset the remaining greenhouse gas emissions.

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Fig. 3.3 Decarbonization path under the goals of carbon peaking and carbon neutrality (Source Zhuang Guiyang and Dou Xiaoming: “Policy Connotation and Realization Path of carbon peaking Under the New Development Pattern”, Journal of Xinjiang Normal University (Philosophy and Social Sciences), Vol. 43, No. 1)

At the current stage, coal is still the foundational energy source in China. Coal accounts for a high proportion of the energy consumption structure. At the same time, coal is also the foundational power source in China. The key to optimizing the energy structure lies in renewable energy replacing coal as the foundation energy source and power source. It is necessary to put in efforts on the supply side and the demand side. The focus of the change is to improve the flexibility of the energy and power system. It is required that energy planning and distribution center around renewable energy. Finally, an energy system in which renewable energy is the mainstay and nonrenewable energy sources such as natural gas adapt to the development of renewable energy is established (see Fig. 3.3). An energy system featuring renewable energy is established on the supply side to promote the planned phase-out of coal-fired power generation. The first is to change the role and the modes of the utilization of traditional fossil energy. The role of thermal power is changed from the main force of power generation to the underlying load of the load curve, peak shaving and energy storage demand regulation as well as supplementary energy. At the same time, in order to achieve carbon neutrality, it is necessary to fully combine thermal power generation with negative emission technology, and leverage negative emission technology to offset carbon dioxide emissions resulting from traditional fossil energy consumption. In the planning process, the planned application and processing scale of negative emission technologies are used to forecast the expected scale of traditional fossil energy consumption in the future. The second is to develop renewable energy-based electricity and nuclear power- based hydrogen production, and gradually increase the utilization of hydrogen energy in terminal sectors. Specifically, the industry proposes using renewable energy-based electricity to produce “green hydrogen” and ensuring “green hydrogen” storage with the idea of “liquid sunshine”. In other words, carbon dioxide and hydrogen react to produce methanol. Further, hydrogen and oxygen combustion leads to hydrogen–oxygen generator sets, which achieve the resources-to-electricity cycle while supplying energy. In this process, renewable energy undergoes a transformation as “resource-electricity-energy storage-energy supply”, which not only ensures renewable energy consumption, but also increases its utilization. The third is to facilitate the transmission of renewable energy from the western region to the

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whole country across provinces and regions through technological and institutional innovations, achieving “spatial transfer” within and on a larger scope and scale. At the same time, the rapid unleashing of demand for renewable energy will provide positive incentives for the supply side. The demand-side change is to primarily meet the end-use energy consumption demand - or the extensive use of electricity in all sectors of the national economy and people’s lives - through electrification, and the direct use of traditional fossil energy in end-use energy consumption is replaced by electricity. Because renewable energy-based power generation, of an intermittent, random and volatile nature, is highly dependent on climatic conditions. To achieve electrification in the energy and power systems, it is necessary to achieve the “time transfer” of energy through demand-side management on the basis of energy storage technology and digital technology. The power system connects supply and demand, and determines the dispatching of “source, grid and load”. It is necessary to scale up regional power grids and promote the “spatial transfer” of energy while matching the supply and demand of renewable energy in the electric power system in real time through technological innovations and institutional reform. In order to promote energy decarbonization, it is necessary to ensure that renewable energy-based power generation maintains an average annual growth rate of 10% in the power industry, and a rebound of coal consumption must be strictly controlled. By the end of the 14th Five-Year Plan period, non-fossil energy will account for more than 20%, with electricity and oil being the first to achieve carbon peaking. The total energy consumption during the 15th Five-Year Plan period will be controlled below 5.5 billion tons of standard coal. Sectors such as industry, construction, and transportation forge inherent and extensive economic relations through the power system. End-use energy consumption determines the level of carbon dioxide emissions. All sectors must formulate “strict and realistic” obligatory targets to control energy-intensive projects with high emissions. As China enters the middle and late stages of industrialization, urbanization will replace industrialization as the main driver behind the growth of energy demand and carbon dioxide emissions. The share of energy consumption in construction and transportation rises accordingly, with industry remaining the biggest carbon emitter. All three involve many energyintensive industries with high emissions such as steel and cement, and their carbon dioxide emissions will shift from peaking to decrease during the 14th Five-Year Plan period, which will create favorable conditions for China to achieve the “dual carbon” goals. China’s commitment to achieving carbon peaking by 2030 and carbon neutrality by 2060 imposes a time constraint on the low-carbon transition. The EU, a global leader in tackling climate change, peaks at 4.5 billion tons of carbon dioxide and has committed to becoming carbon neutral by 2050. China forecasts a peak value of around 10.6 billion tons, and plans to achieve carbon peaking by 2030 and carbon neutrality by 2060. China’s peak value is about 2.4 times that of the EU, but the time interval between achieving carbon peaking and carbon neutrality is only half of that of the EU. As China has a tighter schedule for greater emission reductions than industrialized countries, China moves to realize a rapid transition of the energy sector.

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3.2 Just Transition “Who benefits from the energy transition?” “Who are the victims of the energy transition?” “How does the energy transition impact the people and communities?” and “Why does the energy transition cause such an impact?” Energy transition under the “dual carbon” goals points to the issue of the distribution of interests in the energy transition. The core of energy transition under the constraint of “dual carbon” goals is to build an energy and power system featuring renewable energy, calling for the control of total coal consumption as well as its orderly phase-out. This is bound to cause transition throes such as unemployment. In the context of economic downturn and social differentiation, the energy transition is concerned about the social welfare of affected populations and communities. To put it another way, we should pay attention to the negative impact of these problems on society in addition to issues such as economic growth, environmental protection and climate governance. Regarding the issue of the energy transition, the government focuses more on energy technologies, while society focuses more on economic issues, such as energy prices, energy availability and employment. Due to the uneven distribution of economic and social costs in the energy transition, problems such as unemployment will primarily occur in the coal industry and areas rich in coal resources, aggravating the already imbalanced development capacity among regions. Moreover, the energy transition also significantly impacts industries on the traditional energy supply chain, such as energy-intensive industries like construction, cement, steel, mineral exploration, and machinery. When investment in high-carbon industries is reduced or even withdrawn, product demand and market prices see a downward trend. Considering the chain reaction, job losses may be about three times higher than that caused by the direct impact. In terms of aggregate employment, emerging industries such as renewable energy can make up for job losses to some extent. Because the renewable energy infrastructure field is more capital-intensive and labor-intensive than traditional fossil fuel energy development, the human capital investment, venture capital investment, etc. in the renewable energy industry not only have direct effects on job creation, as well as indirect effects resulting from upstream and downstream manufacturers, but also have the induced effect of employee’s economic activities on the national economy as a whole. According to optimistic estimates, the number of jobs created by the development of emerging industries may even exceed the number of job losses caused by the energy transition. However, in terms of employment structure, the adjustment of the energy structure has a negative impact on employment. As a result of declining fossil energy prices, higher public awareness of climate governance, the slow growth of electricity demand, the increasingly rigorous environmental protection regulations, etc., fossil energy mining and relevant chemical engineering industries, as well as energyintensive thermal power, steel, cement and other industries gradually take steps to “close down, suspend operation, amalgamate with others or switch to the manufacturing of other products”, resulting in job losses in these industries. In the medium to

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long term, most workers in industries such as coal must look for new jobs due to the eventual phase-out of coal-fired power plants. At the same time, emerging industries require more highly skilled workers, which are not suitable for low-skilled labor in carbon-intensive industries. The retraining of workers takes time, and requires funds and labor costs. The mismatched supply and demand structure in the labor market will create structural unemployment problems. The impact on employment levels and its duration varies from industry to industry and over time. While the climate and environmental goals impose constraints such as emission reduction, sustainable use of resources, and environmental protection for economic development, and call for low-carbon transition, the just transition imposes a fair and just principle. In the process of the energy transition, it is necessary not only to pay attention to the quantity and quality of new jobs, but also to focus on the employment structure, help the affected groups adapt to the energy transition, and facilitate their retraining and reemployment. Drawing on the European Green Deal, we can set up a just transition fund and establish an all-round just transition policy system for the affected coal workers. To help coal enterprises in difficulty, market mechanisms should play a mainstay role, supplemented by government assistance. Regarding the affected major coal-producing areas, policy support should be increased to help them develop new alternative industries, such as establishing a sound resettlement system, establishing severance funds, ensuring the income and social welfare of employees, and providing them with targeted retraining, re-education service or entrepreneurial coaching, etc. to prevent social instability.

References Bai Quan, “Building a carbon-neutral modern power, and giving prominence to energy conservation and efficiency improvement”, Energy of China, No. 1, 2021. Bonnie Waring, “There aren’t enough trees in the world to offset carbon emissions: The paradox of forest carbon sequestration,” Climate Change Economics WeChat public account, June 18, 2021. Cao Baowen, Chen Gengli, “Analysis of Technological Development of New Energy Microgrid Based on Patent Information”, Science and Technology Management Research, No. 15, 2018. Guo Yang, Li Jinye, “Research on the Driving Mechanism of New Energy Replacing Fossil Energy in China under the ‘Social Man’ Hypothesis”, China Population Resources and Environment, No. 11, 2019. Gao Sheng, “Carbon Economics: China’s Path to Net Zero Carbon Emissions: Clean Energy Technology Innovation,” Securities Research Report, January 20, 2021. He Jiankun, Teng Fei, Qi Ye, “On Research Tasks and Directions of New Climate Economics”, China Population Resources and Environment, No. 8, 2014. Hu An’gang, “China’s Goal of Achieving emission peak by 2030 and Main Ways of Realization”, Journal of Beijing University of Technology (Social Sciences Edition), No. 3, 2021. Lili Li, Araz Taeihagh. “An In-Depth Analysis of the Evolution of the Policy Mix for the Sustainable Energy Transition in China from 1981 to 2020.” Applied Energy, Volume 263, 2020. Li Junfeng, Li Guang, “Review and Prospects of China’s Energy, Environment and Climate Change Issues”, Environment and Sustainable Development, No. 5, 2020.

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Liu Qiang, Chen Yi, Teng Fei, et al., “China’s Deep Decarbonization Path and Policy Analysis”, China Population Resources and Environment, No. 9, 2017. New Energy, or Unconventional Energy, Refers to Various forms of Energy Other than Traditional Energy, Including Solar Energy, Geothermal Energy, Wind Energy, Ocean Energy, Biomass Energy and Third- Generation Nuclear Energy. Ren Jiqiu, “The Impact of Addressing China’s Steel and Coal Overcapacity on Employment: Empirical Analysis Based on Input-output Table”, Macroeconomics, No. 10, 2017. Tian Maojun, Xue Huifeng, “Problems of and Countermeasures for New Energy Development in Gansu Province”, Gansu Social Sciences, No. 6, 2016. Tian Siqi, “What is the lesson for the reform of the U.S. power grid when wind energy is blamed for Texas power outage?” Jiemian News, February 18, 2021. The compilation team of Comprehensive Project Report, “Comprehensive Report on ‘Research on China’s Long-term Low-Carbon Development Strategy and Transformation Path’”, China Population Resources and Environment, No. 11, 2020. Wang Nengquan, “Emission peak: The Current Situation of the United States and its Inspiration”, Caijing, No. 5, 2021. Zhang Jianzhi, Zhang Zeyi, Wen Yuanyuan, “Germany’s Strategy and Objectives of Promoting Climate Governance and Its Impact”, Environmental Protection, No. 10, 2021. Zhuang Guiyang, Dou Xiaoming, “Policy Connotation and Realization Path of Emission peak under the New Development Pattern”, Journal of Xinjiang Normal University (Edition of Philosophy and Social Sciences), No. 6, 2021.

Chapter 5

Investment Demand for Carbon Peaking and Carbon Neutrality Ying Zhang

All countries are seeking new economic development drivers and needs in the wake of the 2008 international financial crisis. The “dual carbon” goals objectively call for restructuring the energy system, promoting decarbonization in the energy supply system, and achieving electrification for end-use energy consumption. In order to offset the unavoidable carbon emissions, it is also necessary to remove carbon emissions by means of CCS, afforestation, and so on. The “dual carbon” goals have been added to China’s overall plan for ecological conservation, and the relevant plan and specific work schemes are underway. The investment needed to achieve the “dual carbon” goals will become a key support for future economic growth as well as the driver for improving industrial investment level and improving the investment system in China. By achieving the “dual carbon” goals, it will help China’s high-quality economic development, help to address the imbalance of economic structure, coordinate economic development and the environment, stimulate new areas for economic growth, and cultivate a number of high-caliber enterprises with leadership power in the world.

1 Investment Opportunities Brought by the “Dual Carbon” Goals China faces a tight schedule and heavy tasks in its efforts to achieve a quantum leap from carbon peaking to carbon neutrality, but China will reach a new height in economic and social development by achieving the “dual carbon” goals. In order to ensure the realization of the “dual carbon” goals, China must undergo significant and rapid economic restructuring. From an industrial viewpoint, the distribution Y. Zhang (B) Research Institute of Eco-Civilization, Chinese Academy of Social Sciences, Beijing, China e-mail: [email protected] © China Financial & Economic Publishing House 2023 G. Zhuang and H. Zhou (eds.), China’s Road to Carbon Peaking and Carbon Neutrality, https://doi.org/10.1007/978-981-99-3122-4_5

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and development of green industries will bear more responsibilities, bringing huge industrial investment opportunities. From the perspective of the industry, the lowcarbon and green transition of energy- intensive industries, the in-depth development and support of low-carbon industries, and the thriving new energy industry will create new opportunities of investment in technology, market and capital for the economy in all aspects.

1.1 The Impact of the “Dual Carbon” Goals on the Supply Side In China, carbon dioxide is mainly emitted by power generation and heating, manufacturing, construction and transportation sectors. The “dual carbon” goals will compel these industries to carry out efficient production and promote the overall industrial structure featuring clean, green and low-carbon development. For traditional industries, the “dual carbon” goals will promote energy- intensive industries to issue more stringent standards on environmental protection and carbon emissions; raise the cost curve of energy production industries and energy-intensive industries such as coal, petroleum, as well as steel and coal chemical engineering; further consolidate the gains in supply- side structural reform; and crowd out small and medium-sized enterprises with backward production capacity and low production standards in the industry. At the same time, this will create development opportunities for leading companies in terms of energy consumption and cleaner production. It will also create opportunities of investment in technological transformation for traditional industries, new investment in non-fossil energy and in low-carbon new technologies. Its impact will gradually be felt in many industries such as industry, construction and transportation. On the energy supply side, the “dual carbon” goals will speed up the development of the power generation industrial chain based on clean energy, represented by wind energy and solar energy, and also expand development space for related industries such as energy storage and UHV construction. Furthermore, it will expand the development space for the upstream raw material and equipment manufacturing sectors, such as non-ferrous metals (copper, nickel, aluminum, and lithium) necessary for new energy equipment manufacturing, as well as new energy materials, and the downstream new energy vehicle industrial chain. Building green and low-carbon buildings to achieve low-carbon or net zero carbon emissions in the construction sector is also one way to ensure the realization of the “dual carbon” goals. Therefore, the proportion of green buildings will continue to increase in the future. The level of industrialization is low in the construction industry, and the traditional modes of production still dominate. There is still considerable room for making carbon emission reduction during the production and transportation of building materials as well as on-site construction. In addition, China ranks first in

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the world in terms of the number of existing buildings. In view of the current energyintensive existing buildings with high emissions, there are broad market prospects and investment demands for renovation and upgrading.

1.2 The Impact of the “Dual Carbon” Goals on the Demand Side Achieving the “dual carbon” goals will not only reconstruct the industrial chain and economic structure, but also exert a significant impact on the demand side of the economy. From the industry perspective, the “dual carbon” goals will spur low-carbon transformation in traditional industries with high emissions (such as textile printing and dyeing, petrochemicals, steel, and cement), and will objectively lead to a new round of production technology and equipment upgrading, so as to reduce carbon emissions across the board in the manufacturing industry. It will generate a huge demand for low-carbon technology research and development as well as low-carbon equipment manufacturing. China has a sound manufacturing system, but the development level in various industries is uneven, and there will be a great room for new investment. In order to adapt to the “dual carbon” goals, new investment in various industries will increase the demand for low-carbon technologies and equipment. In addition, some major industries will become a key support for economic growth. For example, the infrastructure for the new energy vehicle industry is being built nationwide, the new energy industry will agglomerate and expand, and also drive the synchronous demand of related industries such as charging piles for non-ferrous metals. The consumption of clean electricity such as photovoltaic power and wind power as well as construction investment will increase. On the one hand, it will lead to the adaptive adjustment of the energy supply structure. On the other hand, it will stimulate the growth of the upstream and downstream industries relating to photovoltaic and wind power. Moreover, China is promoting a dual-cycle development pattern relying on both domestic and international economic cycles, with the domestic cycle being the mainstay. The “dual carbon” goals and the double cycles, which are undoubtedly the focus of China’s future development, complement and reinforce each other. First of all, in terms of the domestic cycle, expanding domestic demand is the strategic basis for fostering a new development pattern, and the key to expanding domestic demand lies in comprehensively promoting consumption. The “dual carbon” goals help to improve traditional consumption, such as consumption of automobiles and household appliances; to cultivate new types of consumption, such as smart consumption and online consumption; and to optimize the consumption environment, such as ecotourism. Second, from the perspective of integration into the international cycle, the focus of competition in the international market will be on low- carbon and clean technologies, products and services. Faster realization of the “dual carbon” goals will promote China’s relevant industries and enterprises to occupy the high ground

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in international competition. The “dual carbon” goals and the promotion of the international cycle help China move from extensive to intensive economic development. The two share the common ground of scientific and technological innovation. There is huge potential demand for scientific and technological innovation in China, and breakthroughs are needed for a great many core technologies in key fields. The “dual carbon” goals and the international cycle will promote each other and generate considerable demand for technological investment.

1.3 The Requirements of the “Dual Carbon” Goals for Funding Yi Gang, governor of the People’s Bank of China, said at the roundtable of the China Development Forum that “according to various estimates, the funds for achieving carbon peaking and carbon neutrality will reach 100 trillion yuan”.1 The investment in “dual carbon” goals has a huge demand for funds. With reference to the impact of supply-side structural reform on manufacturing investment in 2018, the “dual carbon” goals may require a demand of at least 550 billion yuan for equipment renewal per year. The scale of green buildings alone may exceed four trillion yuan. The demand for investment in green transportation is estimated at 20 trillion yuan. Investment in renewable energy, energy efficiency, zero carbon technology, energy storage technology, etc. may reach about 70 trillion yuan. From the perspective of industries, huge investment in construction is needed for clean power generation such as wind power and photovoltaic power as well as clean transportation industries such as rail transit. This will be favored by investors for its good market prospects. A number of institutions have calculated the investment needed for achieving the goal of temperature control and carbon neutrality. Specific results are shown in Table 5.1.

1.4 Comprehensive Benefits from Investment in “Dual Carbon” Goals Extensive and high-quality investment is needed in order to ensure the realization of the “dual carbon” goals. As policies supporting the “dual carbon” goals are being implemented, investment and construction will be launched in various industries and regions. Huge investment will bring comprehensive benefits in terms of economy, society, the environment, etc.

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Yi Gang (2021).

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Table 5.1 Calculation of investment demand needed by China to achieve goals of temperature control and carbon neutrality Research institute

Hypothetical scenario

Time interval year)

Total investment (trillion yuan)

Annual investment (trillion yuan) 2021–2030, 2031–2060

Institute of Climate Change 2°C scenario and Sustainable 1.5°C Development, Tsinghua scenario University

2021–2050

127.24

4.2

2021–2050

174.38

5.8

Carbon neutrality

2021–2050

70

2.3

Carbon neutrality

2021–2060

139

3.1–3.6, 3.4–3.6

The People’s Bank of China Carbon / CICC Global Institute neutrality

2021–2060

139

2.2, 3.9

Investment Association of China Price Supervision Center of the National Development and Reform Commission

Source Compiled from the forecasts by various research institutions

1.4.1

Economic Benefits

The principal consideration for traditional economic benefits is the return from investment projects, but various investments for achieving the “dual carbon” goals are not intended to pursue high returns on capital, but to achieve long-term social, economic and environmental progress. However, this does not mean that capital returns are not considered or are impossible for many investment projects. The realization of the “dual carbon” goals must be primarily promoted by the market mechanism. The huge capital invested in the “dual carbon” initiatives will bring handsome returns, because investments in the context of the “dual carbon” goals are mostly made in emerging industries and strategic investments, and low-carbon and new energy industries have abundant development potential. At the same time, an improved investment structure will lead to sustainable economic growth, the “crowding-out effect” cost caused by investments in carbon emission reduction will be gradually reduced, and overall economic benefits will increase.

1.4.2

Social Benefits

The social benefits of investments in the “dual carbon” goals will be manifested in many areas, such as building up low-carbon consensus in society. Residents practicing the low carbon concept will change their way of life, make moderate waste-free consumption, save water and electricity, pay attention to environmental protection, pursue health and advocate for nature. Moreover, construction, maintenance and monitoring before, during and after investments in “dual carbon” goals can create

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tens of thousands of green, low-carbon jobs for economies. For another example, in terms of reform of local state-owned enterprises, there are zombie enterprises and sunset enterprises that require high energy consumption and cause high pollution. These consume a large amount of local government fiscal venue for the sake of preserving jobs, and so on. Under the standards for “dual carbon” goals, they will be forced to shut down, thereby unleashing local fiscal revenue and improving uneven regional development.

1.4.3

Environmental Benefits

To ensure the realization of the “dual carbon” goals, the most fundamental investment is to improve the ecological environment, ease or even reverse the imbalance of nature caused by industrialization, and strive to avoid catastrophic consequences such as climate warming. Furthermore, these investments will also have a synergistic effect on ecological environment improvement in other spheres. For example, conditions necessary for human survival such as air, water, and land will be improved in the context of the “dual carbon” goals. These are directly manifested in the residents’ better living standards, more efficient utilization of resources, and sustainable economic growth.

2 Priority Areas for New Investment for Carbon Peaking and Carbon Neutrality The eleventh chapter of the Outline of the 14th Five-Year Plan (2021–2025) for National Economic and Social Development of the People’s Republic of China and Long-Range Objectives Through the Year 2035 states, “We will make sustained efforts to achieve the objectives of China’s Intended Nationally Determined Contributions 2030 and formulate an action plan to reach the peak of carbon emissions by 2030. We will improve the double control of total energy consumption and intensity, with a focus on controlling fossil energy consumption. We will implement a system that focuses on carbon intensity control supplemented by total carbon emission control, and support the key industries and enterprises in the places where conditions permit to take the lead in reaching the peak of carbon emissions.”2 This is the first time that the “dual carbon” goals are written into the national Five-Year Plan of China. Doing a good job in carbon peaking and carbon neutrality is a key means of practicing the concept of “lucid waters and lush mountains as valuable resources” and promoting green and circular development. We should seize the opportunities brought 2

Outline of the 14th Five-Year Plan (2021–2025) for National Economic and Social Development of the People’s Republic of China and Long-Range Objectives Through the Year 2035, People’s Daily, March 13, 2021.

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by the “dual carbon” goals, develop competitive industrial areas, and continue to optimize the industrial structure and investment direction, which will help us explore a new model for achieving higher quality development with the least carbon emissions. During the large-scale low- carbon and zero-carbon transformation of the national economy, many areas require huge green and low-carbon new investments. Supporting and promoting the rapid development of key industries that go towards “dual carbon” goals will test China’s state governance capacity. Party committees and governments at all levels should develop their ability to promote low-carbon and green development, learn about key industries, and adopt a long-term strategic vision to channel investment to clean energy and other key areas that facilitate low- carbon transition.

2.1 Promote Energy Restructuring 2.1.1

Photovoltaic Power Generation and Equipment Manufacturing

2021 is the first year for the implementation of China’s 14th Five-Year Plan and the key year for electricity generated from photovoltaic power coming on the grid at reasonable prices. Due to the “dual carbon” goals, and the trend of relevant policies and grid-connected new energy electricity at reasonable prices, China will see peak market-oriented construction for photovoltaic power generation during the 14th Five-Year Plan period. It is estimated that an installed photovoltaic capacity of 70– 90 GW will be added in China annually on average, which is expected to accelerate the energy transition. According to the World Energy Outlook released by the International Energy Agency (IEA) in 2019, the proportion of photovoltaic power generation in China will reach 11.2%, 13.2% and 23.4% respectively in 2040 under three scenarios (continuation of current policy, implementation of committed policies, and policy implemented to achieve sustainable development). It is foreseeable that China’s photovoltaic installed capacity will increase greatly in the next decade, with huge space and potential for photovoltaic power generation. Starting in 2015, the annual demand of photovoltaic power plants for investment and financing in China has been no less than 150 billion yuan. According to estimates by New Energy Alliance, by the end of June 2020, the global installed capacity of photovoltaic power was 660 GW, and the international investment in photovoltaic power was US$700 billion. China’s photovoltaic installed capacity was 216 GW, accounting for 32.73% of the global total. China’s photovoltaic investment reached US$220 billion, accounting for 31.43% of the global total. From 2020 to the end of February 2021, there were a total of more than 130 photovoltaic expansion projects announced in China, with a total investment of over 500 billion yuan. In the first two months of 2021 alone, 18 photovoltaic companies announced 25 new major photovoltaic power generation projects with a total investment of 120 billion yuan. The total investment was up by more than 60% over the same period last year. The

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projects cover the core areas of photovoltaic power generation, such as polycrystalline silicon materials, wafers of silicon, cells, modules, solar photovoltaic glass, packaging materials as well as battery equipment.

2.1.2

Wind Power Generation and Related Equipment Manufacturing

In 2019, China’s cumulative installed capacity for wind power generation accounted for over 32% of the world’s total, ranking first in the world for 10 consecutive years in this regard. China has also ranked first in the world for 11 consecutive years in terms of new installed capacity, accounting for nearly 48% of the world’s total. China’s performance in offshore wind power is particularly prominent. According to the report by the Global Wind Energy Council (GWEC), China is still the leader in the new installed capacity of offshore wind power, with a new installed capacity of over 2.3 GW added in 2019, followed by the UK and Germany with 1.8 GW and 1.1 GW, respectively. By the end of 2019, the cumulative amount of wind power connected to the grid exceeded 210 million kilowatts, making huge contributions to China’s energy restructuring, economic transformation and upgrading, and response to environmental and climate change. At the Beijing International Wind Energy Conference (CWP 2020), representatives of over 400 wind energy companies from around the world jointly issued the Beijing Declaration on Wind Energy, which proposes ensuring that the average annual increase in installed capacity of wind power during the 14th Five-Year Plan period should be more than 50 million kilowatts, and China’s wind power industry should achieve sustained, steady and rapid development. Due to the lowering of benchmark wind power-based electricity prices, there was a rush to install wind power facilities from 2015 to 2019, and as a result, new installed capacity increased significantly. According to data, in 2019, the cumulative installed capacity of wind power in China reached 210.05 million kilowatts, a yearon-year increase of 14%; and the new installed capacity reached 26.785 million kilowatts, a year-on-year increase of 26.7%. From January to August 2020, 10.04 million kilowatts of new grid-connected installed capacity of wind power was added, bringing the cumulative installed capacity to 220.09 million kilowatts. In terms of investment in wind power, the amount of completed investment in power projects fluctuated greatly from 2013 to 2019. From 2013 to 2015, the investment soared from 65 billion yuan to 120 billion yuan. From 2015 to 2018, the amount of completed investment in power engineering decreased due to the reduction in wind power costs, but it grew significantly in 2019. The data shows that the completed investment in wind power projects in 2019 reached 117.1 billion yuan, a year-on-year increase of 81.3%. From January to August 2020, it reached 132.9 billion yuan, a year-on- year increase of 145.4%. China’s Wind Power Development Roadmap 2050 released by the Energy Research Institute of the National Development and Reform Commission details the strategic distribution of wind power. It predicts that investment in wind power development in 2050 will reach 427.6 billion yuan, bringing the cumulative investment to 12 trillion yuan.

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Construction of UHV Power Grid

Ultra-High Voltage (UHV) transmission boasts the technical advantages of large transmission capacity, long distance, high efficiency, low loss, etc. Specifically, in the case of UHV DC lines, the transmission power is 5 to 6 times higher than that of the existing 500 kV DC transmission and 2 to 3 times in terms of transmission distance. Compared with traditional electric power transmission technology, UHV transmission can reduce losses by 45%, reduce the width of the line corridor per unit capacity by 30%, and cut the cost per unit capacity by 28%. UHV transmission is safer, more efficient and environmentally friendly. China’s natural resources are unevenly distributed, with hydropower-related industries concentrated in southwest China such as Sichuan, Yunnan, and Tibet, wind power and photovoltaic-related industries in northwest China, and coal-related industries concentrated in northern China such as Shanxi, Inner Mongolia, and Xinjiang. While electricity is primarily consumed in coastal economically developed southeast China with relatively scarce land resources, such as Jiangsu, Guangdong, Shandong, and Zhejiang. Due to the objective limitations as well as breakthroughs in and application of UHV technology, a power grid featuring west-to-east power transmission and north-to-south power transmission has been built. UHV construction turns China’s power grid into “one network”, and the UHV-based power grid has become a major channel for energy transmission. China’s UHV project construction can be divided into four stages: The first stage is an experimental exploration from 2006 to 2008; pilot demonstration projects gradually advanced. The second stage is small-scale peak development from 2011 to 2013; the important task of building strong smart grids was implemented. The third stage is peak development from 2014 to 2016; the Action Plan on Prevention and Control of Air Pollution was implemented. The fourth stage lasts from 2018 to the present; there is demand for clean energy transmission, and infrastructure investment is promoted. In 2018, China approved and launched five UHV key projects with an investment of 65.8 billion yuan. In 2019, China approved and launched two UHV key projects with an investment of 55.3 billion yuan. In 2020, State Grid Corporation of China said that investment in UHV construction projects for the whole year would reach 181.1 billion yuan, which could drive nongovernmental investment of 360 billion yuan, making the cumulative investment reach nearly 541.1 billion yuan. During the 14th Five-Year Plan period, the UHV industry remains a hot area of investment. State Grid Yazhong-Jiangxi ± 800 kV UHV DC project was put into operation on June 21, 2021, becoming the first UHV DC transmission project put into operation by State Grid during the 14th Five-Year Plan period. State Grid has now built a total of “13 AC and 13 DC” UHV projects. The UHV lines in operation and under construction are 41,000 km long. Substation (commutation) capacity exceeds 440 million kVA (kW), and electricity cumulatively transmitted exceeds 1.8 trillion kWh. The interregional and inter-provincial transmission capacity by the business areas of State Grid Corporation of China exceeds 260 million kilowatts. Large UHV power grids play an increasingly key role in building a new type of power system featuring new

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energy, and promoting energy transition and low- carbon development. The Development and Investment Trends on China Ultra- high Voltage Power Grids issued by CCID Consulting predicts that by 2022, China will have completed the expansion of more than 10 UHV substations in Wuhu city in Anhui Province, Jinzhong City in Shanxi Province, etc.; China is expected to approve and launch a total of 10 newly planned “five AC and five DC” UHV line projects, which will drive a total investment of 414 billion yuan in the upstream and downstream supporting sectors of the industrial chain. By 2025, more than 30 new UHV line projects will be approved in China, directing social capital of 587 billion yuan into the upstream and downstream markets on the industrial chain.

2.2 Promote Energy and Material Saving, and Improve Energy Efficiency 2.2.1

Green and Low-Carbon Technology Reform

Carbon neutrality has become a major national strategy with important significance. Externally, carbon emission reduction is a global action against climate warming, and concerns national energy security and competition among great powers. On the one hand, the global energy revolution will spark fierce competition in pursuing clean energy. Clean energy such as hydropower, photovoltaic power, and wind power has become the focus of competition. Making breakthroughs in zero emission technology and formulating standards are the top priority. On the other hand, carbon neutrality has become the main area of trade conflicts and competition among great powers. Some developed countries are discussing and studying the possibility of imposing a “carbon tariff” on imports from countries that have not implemented carbon reductions, and raising trade barriers. Some countries even regard carbon neutrality as a new threshold standard for global energy markets and industrial investment, thereby raising the threshold for international trade and investment. Internally, carbon neutrality is a key economic growth area in the post-COVID era, and is also the only way for China to achieve transformation and upgrading as well as green development. Carbon neutrality promotes the innovation of green and low-carbon technology. On the one hand, it leads to the upgrading of inefficient capacity and the phase-out of outdated production facilities. On the other hand, electrification and digital and green development promote the upgrading of traditional industries. It will promote the fundamental changes in the pattern and paradigm of development, cut costs, improve the economies of scale, reshape the global industrial chain, and give an impetus to industrial transformation as well as the upgrading of the economy. According to the roadmap of major countries towards carbon neutrality, there are three directions for technological change: First, digitalization. New business forms are cultivated with the aid of technologies such as 5G, industrial Internet, artificial

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intelligence, and cloud computing. Digital transformation promotes emission reduction and efficiency improvement, and leads to new progress in carbon emission sectors such as electricity, industry, transportation and construction. Second, electrification. It is necessary for traditional power generation enterprises to carry out technological transformation. Greater efforts should be made to develop the modes of the utilization of green energy such as new energy vehicles, building materials and buildings, as well as integration of buildings and photovoltaic power, promote the replacement of electric energy, and expand electrification. Third, green development. Through the development of new energy batteries, charging piles, hydrogen energy, biomass fuels, CCUS, etc., we can improve the energy structure, utilize energy more efficiently, form an industry chain of circular economy, and build a low-carbon economy. According to the Guiding Opinions on Building a Market-Oriented Green Technology Innovation System issued by the National Development and Reform Commission and the Ministry of Science and Technology, it is necessary to study and formulate standards and specifications for the identification of green technology innovation enterprises and to identify enterprises that carry out green technology innovations. We implement the “ten-hundred-thousand” program for green technology innovation, nurture 10 leading enterprises for green technology innovation with an annual output value of over 50 billion yuan, support 100 enterprises in building national green enterprise technology centers, and identify 1000 enterprises for green technology innovation. We support enterprises under the “ten-hundred-thousand” program in undertaking key green technology innovation projects planned by the state and local governments. We increase support for enterprises’ green technology innovations. Enterprises must be involved in non-basic green technology R&D projects supported by fiscal funds, as well as market-oriented green technology innovation projects. Enterprises should take a leading role in green technology R&D projects supported by the National Science and Technology Major Project and National Key R&D Program of China, with a proportion of no less than 55%.

2.2.2

Energy Saving Services

The upgrading of the manufacturing sector and the design of energy- saving products are the “carbon application” link under the “dual carbon” goals. According to calculations, energy conservation contributes more than 70% towards China’s goal of achieving carbon peaking by 2030. Second, development of renewable energy and nuclear power contributes about 30%. Energy saving is the principal way for energy systems to achieve large-scale reductions in carbon dioxide emissions by 2050. The energy-saving service industry provides services and support for enterprises and projects in terms of energy saving, emission reduction, etc. Energy-saving services companies are also known as “energy management contract companies (EMC companies).” In 2018, investment in energy-saving service projects in China corresponded to an annual energy-saving capacity of 39.3 million tons of standard coal, and an annual carbon dioxide reduction capacity of 106.51 million tons. In 2019, investments in China’s EMC projects corresponded to an annual energy-saving

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capacity of 38.01 million tons of standard coal, and an annual carbon dioxide emission reduction of 103 million tons. It is estimated that by 2025, the energy conservation capacity of China’s energy-saving service industry will exceed 57.27 million tons of standard coal. In recent years, China has issued many favorable policies for the energy- saving service industry, and attached increasing importance to it by providing sufficient fiscal support. In 2019, China’s spending on energy conservation and environmental protection was 744.4 billion yuan, a year-on-year increase of 18.2%. In 2020, China’s spending on energy conservation and environmental protection reached 631.7 billion yuan, down by 14.1% compared with 2019 due to the impact of the COVID-19 pandemic. At the same time, the output value of the energy-saving service industry is increasing. According to data from the ESCO Committee of China Energy Conservation Association (EMCA), in 2019, the output value of China’s energy-saving service industry totaled 522.2 billion yuan, a year-on-year increase of 9.4%. As the energy-saving service industry continuously develops, by 2025, the output value of the national energy-saving service industry is expected to total 808 billion yuan. The EMC projects are funded by companies providing energy-saving services, which can only share the benefits of energy saving with customers as well as recover cash flow after energy saving generates benefits. Therefore, energy-saving service companies have a huge demand for funds in the early stage. Since 2007, the People’s Bank of China, China Banking Regulatory Commission, China Securities Regulatory Commission, etc. have issued many policies to provide financing support for energy-saving and environmental protection enterprises. Financing means such as green credit, green funds, green insurance, green trusts, green Public–Private Partnership (PPP), and green leasing have been emerging. In 2019, the investment in EMC projects reached 114.11 billion yuan, a year-on-year decrease of 2.3%, the first decline since 2011, primarily because of supply-side reform policies and the cancellation of policies on substituting subsidies with rewards for PPP projects. Qianzhan Industry Research Institute predicts that the EMC investment in energy saving service industry will continue to see positive growth, reaching about 139.2 billion yuan by 2025. It is estimated that the total demand for energy conservation investment will exceed two trillion yuan during the 14th Five-Year Plan period. It is estimated that by the end of the 14th Five-Year Plan, the output value of the energy-saving service industry will exceed one trillion yuan, more than one million jobs will be created in this sector, and the annual investment in energy conservation and energy efficiency improvement will exceed 150 billion yuan. At the same time, the capacity for technology and service innovation will be further improved, the industrial structure will be further optimized, and enterprises become significantly more competitive.

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2.3 Accelerate the Replacement of High-Carbon Emission Methods Through the End-Use of New Energy 2.3.1

New Energy Vehicles

China attaches great importance to the development of new energy vehicles, which is listed as one of the strategic emerging industries. The Energy-saving and New Energy Vehicle Technology Roadmap 2.0 prepared by the Ministry of Industry and Information Technology and China Society of Automotive Engineers was officially released in October 2020. First of all, according to the roadmap, the models of new energy vehicles include battery electric vehicles (BEVs), plug-in hybrid electric vehicles (PHEVs) and hydrogen fuel cell vehicles. Second, the roadmap makes predictions for different models. The annual sales volume of the BEVs and PHEVs in 2025, 2030 and 2035 are expected to account for 15% to 25%, 30% to 40% and 50% to 60% of the total sales volume of vehicles, respectively. For hydrogen fuel cell vehicles, the number of vehicles in operation in 2025 may reach 100,000, and the number of vehicles in ownership is expected to reach about one million by 2035. These all mark a quantum leap. According to incomplete statistics, 202 new energy vehicle production projects were launched in six years from 2015 to 2020, with a total investment of over 1.2 trillion yuan and a total capacity of 30 million vehicles. According to data from the Ministry of Industry and Information Technology, the cumulative investment in the industrial chain of new energy vehicles in China has exceeded two trillion yuan, which has increasingly become a new driver for development. China has ranked first in the world for five straight years in terms of turnover of new energy vehicles, and more than 4.8 million vehicles were promoted (accounting for about 1.7% of the total number of cars in ownership), accounting for more than half of the world’s total. In recent years, the field of new energy vehicles has been favored by the capital market. According to data from Qichacha, the platform for inquiring about industrial and commercial information of enterprises, from 2011 to 2020, there were 897 investment and financing projects for new energy vehicle brands, with a disclosed investment and financing amount of 384.11 billion yuan. Of this, the annual number of investment and financing projects exceeded 160 for three years from 2016 to 2018, with 185 projects in 2017, which is the largest. In 2020, there were a total of 89 investment and financing projects, with a disclosed financing amount of nearly 129.21 billion yuan, exceeding the mark of 100 billion yuan for the first time in nearly 10 years.

2.3.2

New Energy-Based Heating

Heating supply is people’s basic demand for energy for their lives and work, accounting for about 50% of the global end-use energy consumption. At present, new energy-based heating has developed at a fast clip thanks to the government’s green development concept and many national policies. New energy-based heating

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primarily includes geothermal energy heating, biomass heating, solar energy heating utilization, and clean electricity-based heating. Clean electricity-based heating is indirect utilization of thermal energy, and the rest are direct utilization of thermal energy. According to the 3rd China Heating Academic Conference (2020) held by China District Heating Association, by the end of 2019, new energy-based heating only accounted for 3% of the heating source structure in north China, which promises great development potential. China’s new energy-based heating potential is expected to exceed three billion tons of standard coal. According to the survey results from the Ministry of Land and Resources, the annual recoverable resources of shallow geothermal energy in 336 cities at the prefecture level or above in China are equivalent to 700 million tons of standard coal and 1.9 billion tons of standard coal. The annual heating potential of biomass resources such as forestry residues, energy crops, domestic waste, and organic wastes is equivalent to 460 million tons of standard coal. Of this, the annual utilization potential of agricultural and forest wastes such as crop straws is equivalent to 400 million tons of standard coal. Beijing Guofa Smart Energy Technology Institute and Green Energy Think Tank predict that the large-scale development of the geothermal resource industry may directly lead to an investment of 400 billion yuan and lead to a total investment of one trillion yuan for the whole geothermal industrial chain. By 2035, the total investment in the whole geothermal industrial chain will reach five trillion yuan. In 2020, new investment in the biomass energy industry reached about 196 billion yuan, of which the new investment in the biomass briquette-based heating industry reached about 18 billion yuan. According to the National Energy Administration, by the end of 2019, 97 billion yuan had been invested in clean heating during the power grid transformation.

2.4 Growing Demand for Upstream Non-Ferrous Metal Raw Materials Technological breakthroughs and profit increases in the field of new energy have brought about tremendous changes in the energy industry, and China’s dependence on coal, oil and natural gas has gradually decreased. As a resource-intensive industry, the traditional energy industry is highly dependent on resource endowments. The new energy industry, as a technology-intensive and knowledge-intensive industry, is highly dependent on the development level and technical level of the manufacturing sector. This will create new development space for non-ferrous metals such as copper, aluminum, lithium and nickel necessary for the manufacturing of upstream new energy equipment.

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Copper

From the perspective of distribution, the world’s copper resources are mainly concentrated in Chile, Peru, the United States, and China. The top five mine copper suppliers in 2019 are Chile (28%), Peru (12%), China (8%), Congo (7%), and the United States (6%). These five countries had a combined global share of over 60%. Overall, the distribution of copper resources is relatively concentrated, mostly in Chile and Peru. In the context of the “dual carbon” goals, the new energy transition in non- fossil energy-based electricity and transportation has a great demand for copper, driving the development of the copper industry chain. Electricity (involving wind power, photovoltaic power, energy storage) and transportation (involving new energy vehicles and charging piles) account for approximately 40% and 10%, respectively. The China Photovoltaic Industry Association (CPIA) predicts that during the 14th FiveYear Plan period, the annual average new installed capacity of photovoltaic power in China is generally estimated at 70 million kilowatts, and optimistically estimated at 90 million kilowatts. At the CWP 2020, more than 400 wind power companies made a joint statement for the first time, committing themselves to increasing the annual installed capacity of wind power by over 50 million kilowatts on average. After 2025, the average annual installed capacity of wind power in China should be no less than 60 million kilowatts; this figure should be at least 800 million kilowatts by 2030. According to the research data released by the National Copper Association, the average amount of copper utilized in renewable energy systems is more than 8 to 12 times that of traditional power generation systems. A wind turbine generator system requires about six tons of copper per megawatt, and a solar photovoltaic power generation system requires about four tons of copper per megawatt. According to the calculation of the installed capacity of wind and photovoltaic power, it is estimated that from 2021 to 2025, wind and photovoltaic power systems will consume 1.5 million and 1.12 million tons of copper respectively, and the annual total consumption of copper for wind power and photovoltaic power will be 524000 tons. From 2026 to 2030, wind and photovoltaic power systems will consume 1.8 million and 1.12 million tons of copper respectively, and the annual total consumption of copper for wind power and photovoltaic power will be 584000 tons. In the field of transportation, new energy vehicles use far more copper than traditional oil-powered vehicles. According to estimates, the average annual copper consumption for new energy vehicles from 2021 to 2025 will be 290000 tons. By 2025, the overall copper consumption for new energy vehicles and matching charging piles will reach 557500 tons. Due to the huge market demand, China’s copper mine projects have been implemented one after another. In 2020, Jiangxi Copper Corporation announced a total investment of 2.12 billion yuan for the Wushan copper mine Phase III expansion project, which is one of the first batch of key construction projects in Jiangxi Province in 2020.

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Aluminum

Bauxite distribution is relatively scattered, and the top five producers are Australia, Guinea, China, Brazil and India. In 2019, China produced 68.4 million tons of bauxite, accounting for 19.3% of the world’s total. Aluminum smelters are mainly located in China, Russia, India, Canada, Australia, the United States, etc., with the aluminum production primarily concentrated in China. In 2020, the global output of aluminum was 65.2 million tons, 37 million tons of which were produced in China, accounting for 56.7% of the world’s total. China ranked first in the world in terms of refined aluminum and recycled aluminum output, which accounted for 54.5% and 41.4% of the world’s total, respectively. There is a growing demand for aluminum in the transportation, photovoltaic power, and wind power sectors due to the “dual carbon” goals, as well as environmental protection requirements in the construction sector. To begin with, aluminum is increasingly used in the construction industry, particularly for aluminum alloy doors and windows, polyethylene-aluminum composite pipeline, decorative sheets, and aluminum panel curtain walls, for environmental protection requirements thanks to its stability in the air, high recycling value and little pollution. Second, aluminum alloy can be used for the lightweight bodies of new energy vehicles, high-speed trains, and aircraft fuselage, becoming a key metal material for the transportation sector to enhance the transportation mileage per unit of energy consumption. Third, photovoltaic and wind power plants have a huge demand for cables. The demand gradually increases for aluminum alloy cables which are characterized by low cost and excellent performance. According to estimates, in the next 5 years, the average annual new consumption of aluminum for photovoltaic plates is expected to reach 1.989 million tons in China, and 6.133 million tons in the world. In the next five years, China’s demand for aluminum for new energy vehicles will reach 1.43 million tons, and the global demand for aluminum will reach 14.657 million tons. In the next 10 years, the demand for aluminum will increase to 4.2 million tons in China, and 54.202 million tons in the world. Due to the growing demand for aluminum, aluminum enterprises increase their investment. CHALCO, China’s non-ferrous metal leader, makes project investment in Guinea, which is known as the “bauxite kingdom”. It invested in the construction of the Guinea Boffa bauxite project through its whollyowned subsidiary CHALCO Hong Kong Investment Company Limite, with a total investment of about US$706 million.

2.4.3

Lithium

The world has an abundant supply of lithium resources, which are mainly distributed in South America, China and Australia. According to the U.S. Geological Survey (USGS), global lithium resource reserves in 2017 were approximately 13.5 million tons (lithium metal), which are mainly concentrated in Chile (7.5 million tons, accounting for 48%), China (3.5 million tons, 21%), Australia (2.7 million tons, accounting for 17%), and Argentina (2 million tons, accounting for 13%). Other

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countries rich in lithium resources include the United States, Brazil, Portugal and Zimbabwe. As we move towards the “dual carbon” goals, the demand for lithium carbonate, a material essential for the cathode of lithium-ion batteries, increases rapidly when new energy vehicles gain popularity. Roskill, a British consulting company, estimated that the capacity of the global lithium-ion battery product lines will increase by more than 8.75 billion watt-hours in 2030. By 2030, China’s lithium-ion battery production capacity is expected to account for 60% of the world’s total. According to the data from China Center for Industry Development (CCID), the downstream applications of lithium ore in 2019 are primarily manifested in the lithium-ion battery industry. The major products of electric vehicles, mobile phones, laptops, energy storage, and other consumer electronics accounted for 46.7%, 10.2%, 9.6%, 5.1% and 20.2% of lithium battery products, respectively. Haitong International predicts that by 2025, lithium consumption of power batteries will increase from 132,900 yuan lithium carbonate equivalent (LCE) in 2020 to 668,900 tons LCE; the demand for lithium carbonate in energy storage will reach 184,000 tons; the global demand for lithium carbonate of electric bicycles will reach 337,000 tons; the demand for lithium in the consumer electronics sector may jump from 95,000 tons of lithium carbonate in 2020 to 128,000 tons of lithium carbonate; the global demand for lithium carbonate will reach 1.5 million tons, with a compound growth rate of 27.4% compared to 2020. The considerable increase in lithium demand will give rise to the investment in and construction of lithium projects. In 2018, Tianqi Lithium, China’s lithium giant, launched a 20,000 ton battery- grade lithium carbonate construction project, with an estimated investment of over 1.4 billion yuan.

2.4.4

Nickel

From the perspective of national and regional distribution, nickel ore is relatively concentrated. The top five nickel supplier countries and regions in 2019 are Indonesia (35%), the Philippines (13%), Russia (9%), New Caledonia (8%), and Canada (7%). These five countries and regions accounted for more than 70 percent of the global share. China’s nickel ore resources are primarily distributed in 19 provinces in the northwest, southwest and northeast. Gansu has the largest reserves (62%), followed by Xinjiang (11.6%), Yunnan (8.9%), Jilin (4.4%), Hubei (3.4%) and Sichuan (3.3%). The downstream consumption areas of nickel are mainly stainless steel, nickel alloys, batteries, and electroplating. Stainless steel has the largest demand for nickel, accounting for 85% in China and 69% in the world. After China proposed the “dual carbon” goals, new energy vehicles and battery energy storage have substantially increased the demand for nickel, accounting for 8% of the downstream demand for nickel ore in China, which is mainly attributed to ternary battery’s demand for nickel sulfate in the new energy vehicle industrial chain. The new subsidy policy for new energy vehicles has a higher demand for mileage, battery performance, and energy consumption level, and manufacturers are encouraged to develop and produce batteries with higher energy density as well as lighter car body. As a result, battery

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manufacturers are highly interested in high-nickel ternary materials. The growing output of high nickel ternary materials leads to a great increase in the production capacity of nickel sulfate. According to the data, the global market share of electric vehicles is expected to reach 8 to 20% by 2025 and 17 to 38% by 2030. By 2030, the global sales volume of electric vehicles is expected to exceed 20 million, and electric vehicles’ demand for nickels will also increase significantly. By 2030, the nickel demand is conservatively estimated at more than 890,000 tons, and aggressively estimated at 1.7 million tons; the proportion of nickel demand is expected to soar from the current 3% to 37%. Considering the huge demand for nickel, Huayou Cobalt said in May 2021 that it would cooperate with companies including electric vehicle battery manufacturer EVE Energy in launching a US$2.08 billion worth of nickel and cobalt project in Indonesia.

3 Investment and Financing Mechanism to Ensure the Realization of “Dual Carbon” Goals 3.1 Shortage of Funding for Investment At present, investment is woefully inadequate for achieving the “dual carbon” goals in China. According to many estimates, there is a shortage of one hundred trillion yuan. For example, China International Capital Corporation Limited (CICC) estimates that the total investment required to achieve the carbon neutrality goal in China is about 139 trillion yuan. According to relevant researches by the National Development and Reform Commission, China’s annual fund for achieving “dual carbon” goals is only 526.5 billion yuan, which is far less than the annual 3.1 to 3.6 trillion yuan required to achieve carbon peaking by 2030. The annual funding shortage is more than 2.5 trillion yuan. At present, governments must focus on sustainable development in the face of increasing environmental problems. Carbon neutrality is included in the green recovery plans of various economies as a key means for tackling climate change. The realization of the carbon neutrality goal has a high demand for the directly related transformation of the energy structure. The transformation of the energy structure and a surge in the demand for non-fossil energy lead to a great demand for investment and financing. It also increases the cost of environmental pollution control under the structure of polluting industries and traditional energy. The “dual carbon” goals point the way forward for China’s subsequent energy transition as well as green and low-carbon development, forcing China to pursue green and lowcarbon development faster. This creates great opportunities for China to achieve green and sustainable development, but insufficient funding poses a significant obstacle to green and low-carbon development. To solve the problem of inadequate funding for the “dual carbon” goals, an appropriate investment and financing mechanism is necessary.

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3.2 Investment and Financing Mechanisms for “Dual Carbon” Goals To pursue green and low-carbon development and achieve the “dual carbon” goals as soon as possible, it is necessary to establish an innovative investment and financing mechanism. On the one hand, China has a huge demand for low-carbon transformation and development, which requires a wealth of capital investment. On the other hand, a wealth of nongovernmental funds in China is seeking areas for investment. Therefore, the fundamental way to meet the needs of “dual carbon” goals for sufficient investment and financing is to design a good mechanism that attracts a wealth of nongovernmental funds and improves the efficient utilization of funds. For the huge investment required for the “dual carbon” goals, government funds can only contribute a small part, while the capital provided by traditional financial institutions for “dual carbon” goals must be further guided. The huge funding shortage should be met by market funds. This calls for the establishment of a sound investment and financing policy system for the “dual carbon” goals, and the financial system should be guided and incentivized to support the investment and financing activities for the “dual carbon” goals in a market-oriented manner.

3.2.1

Diversified Investment and Financing Entities for “Dual Carbon” Goals

The investment and financing mechanism should be innovated to achieve the “dual carbon” goals. The purpose is to establish a diversified, green and market-oriented investment and financing model, thereby providing sufficient market incentives for investment in the “dual carbon” goals as well as sufficient financial support for low-carbon development. “Diversified” refers to including diversified investment and financing entities, designing diversified investment and financing models and providing diversified green financial products. Diversified investment and financing entities include the government (governments at all levels as well as relevant government departments), investment institutions (banks, securities companies and insurance companies, etc.), investment institutions (investment fund companies, asset management companies, financial leasing companies, etc.), intermediary institutions (evaluation agencies, technology exchanges, testing institutions, etc.), enterprises (polluting and pollution treatment enterprises), etc. We should appropriately lower the threshold of access to relevant financial fields, encourage non-bank financial institutions and other social entities to take an active part in developing investment and financing methods to ensure the realization of the “dual carbon” goals, and increase the number of participants in the green financial market. To achieve healthy development for the “dual carbon” goals, it is necessary to rationalize and balance the relations between the government, the market and society. The government must improve the policy incentive mechanism, channel financial capital towards

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key industries that ensure the realization of the “dual carbon” goals, as well as introduce a market-oriented mechanism and establish multi-level and diversified financial markets. Governments should also extensively involve the whole society as a powerful supplement to the government guidance and market operation. At present, the establishment of an investment and financing mechanism for the “dual carbon” goals can neither overly rely on the mandatory government administrative power, nor completely rely on the independent adjustment of the market mechanism, not to mention the conscious participation of society. To build a healthy investment and financing mechanism for the “dual carbon” goals, it is necessary to rationalize and balance the relations between the government, the market and society. Given the different roles and functions of the government, the market and society in the investment and financing system, we should establish a long-term investment and financing mechanism featuring “government guidance, market-oriented operation and social participation.”

3.2.2

Innovative Investment and Financing Ways for “Dual Carbon” Goals

Green finance is also known as environmental finance or sustainable finance. It primarily studies the issues of accommodation of funds in the green economy, and is an effective combination of sustainable economic development and financial issues. The investment and financing activities ensuring the realization of the “dual carbon” goals should focus more on financial support for the global control of GHG emissions. The two are both differentiated and connected. At present, China’s carbon trading market is improving. The ways of investment and financing ensuring the realization of the “dual carbon” goals still largely rely on traditional green finance mechanisms and methods. Overall, the financial mechanism ensuring the realization of the “dual carbon” goals is still in a stage of exploration, with a host of problems such as imperfect government guidance mechanism, immature market operation system, and a low level of social engagement. These problems are in the final analysis attributed to the mechanism. The key to the investment and financing mechanism ensuring the realization of the “dual carbon” goals is to balance the relationship between the government and the market, with the main tasks including the innovation in investment and financing mechanism, and the innovation in financial products. In order to tackle climate change and conduct low-carbon transformation and development, it is necessary to increase financial support and promote the pilot investment and financing program for the “dual carbon” goals under the guidance of government investment policies. It is necessary to evaluate risks, improve the environmental information disclosure system, establish a system of compensation for investment risks of green and low-carbon projects, and spread financial risks through insurance and guarantees. We should improve the incentive mechanism, make clear the goals and implementation paths, innovate financial services, and improve the product system, including green loans, green equity, green bonds, green

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insurance, green funds and other financial instruments. We should develop instruments in support of carbon emission reduction, guide financial institutions to provide long-term and low- cost funds for green and low-carbon projects, and encourage development- and policy-oriented financial institutions to provide long-term stable financing support for carbon peaking initiatives according to the market-oriented and law- based principles. We should expand the depth and scope of the green bond market, and support eligible green enterprises in obtaining financing through going public, listing and refinancing. We should study the establishment of a national low-carbon transition fund and support the green transition of traditional industries and resource-rich areas. We should encourage private capital to set up green and low-carbon industry investment funds in a market- oriented manner, promote personnel training and technological innovation, and provide sustainable investment and financing paths for the realization of the “dual carbon” goals through technological and financial innovation. Building a national carbon emissions trading market at a faster pace is a key institutional innovation to reduce greenhouse gas emissions, promote green and low- carbon transition and technological innovation, as well as a key way to fulfill commitments to emission reduction and achieve the “dual carbon” goals. China is a big carbon emitter, with many key emitting entities and enterprises in the steel, electricity, cement, transportation and other industries. It is imperative to build a carbon market in China in the context of capital market development. China should move faster to build the carbon trading market and open up the national carbon market. Judging from the experience in the international carbon market, the carbon spot market, carbon futures and its derivatives market constitute a complete carbon market system, which plays a proactive role in tackling climate change and spurring the development of the low-carbon economy. The building of the carbon market and carbon financial innovation should be promoted in a coordinated way. On the basis of the initial spot trading in carbon quota, we should leverage the supporting role of finance in building the carbon market. Carbon quota pledges and mortgage financing, carbon futures, carbon forwards, securitization of carbon assets, and other innovative financial products should be developed in an orderly manner. We should improve trading varieties and modes of service, enhance carbon price discovery function and formation efficiency, increase the role of carbon markets in emissions reduction and green financial resource allocation, and effectively balance the relationship among incentives, multiple periods and risk management in green and low-carbon investment. We should promote investment in and the research and development of green, low-carbon technologies, explore financial support for product innovations such as zero-carbon parks, zero-carbon buildings, and establishment of corporate carbon accounts, as well as develop financial products based on carbon footprints. We should increase debt financing instruments and bond financing based on the carbon neutrality goal, with a focus on supporting eligible green and lowcarbon projects. We should move faster to study and establish tools in support of carbon emission reductions, and encourage the financial sector to increase support for green and low-carbon projects that significantly contribute to emission reduction.

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We should establish a national center for trading in carbon peaking and carbon neutral technologies, and speed up the R&D and application of new technologies. We should promote innovations in green credit products through the mortgage guarantee model, improve the green credit mechanism of commercial banks, and spur the development of carbon trading and carbon finance markets. We should work to promote the mandatory carbon emission liability insurance system, and establish a green and low-carbon insurance system as soon as possible in which carbon emission targets are the mainstay and multiple types of innovative insurance coexist. We should move faster to innovate investment and financing services for the “dual carbon” goals and build a carbon finance market system for balanced development.

3.2.3

Selection of Investment and Financing Mechanism Strategy to Ensure the Realization of “Dual Carbon” Goals

Some countries have actively explored efforts to promote the realization of the “dual carbon” goals through innovative investment and financing mechanisms. Despite the different forms, the measures can be summarized as follows: enact laws and regulations to aid the realization of the “dual carbon” goals, establish government guidance funds, provide tax incentives and subsidies for green and low-carbon industries, improve financing channels, improve information transmission and guarantee systems, etc. The governments establish a framework suitable for the development of a green and low-carbon economy, establish sound investment and financing mechanisms that help to meet the “dual carbon” goals, and channel financial capital to the green and low-carbon field. 1. Strengthen top-level planning and improve laws, regulations and standards. The realization of the “dual carbon” goals can become a key driving force for the recovery and sustainable development of the global green economy. It is necessary to promote the development of a low-carbon economy in a coordinated manner and minimize carbon emissions through green and low-carbon ways of work and life. The key to meeting “dual carbon” goals lies in promoting low-carbon energy transition. The outline of the 14th Five-Year Plan clarifies the direction of faster green and low- carbon transition. A clearer low-carbon strategy must be implemented in the energy, construction, transportation, manufacturing, agriculture, and financial industries. It is recommended to improve the mechanism for coordinating the policies and practices of investment and financing for the “dual carbon” goals as well as green low-carbon technology, establish a multi-level service system for financial support for the “dual carbon” goals, and provide incentives and guaranteed operating mechanisms. In early 2021, China Financial Standardization Technical Committee compiled the Guidelines for Financial Institutions Environmental Information Disclosure (Trial) to regulate and strengthen environmental information disclosure by financial institutions. These mechanisms for improving the green financial market lays the groundwork for the investment and financing mechanism under the “dual carbon” goals.

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However, the green finance standard system is not yet aligned with the carbon neutrality goal; the constraint and incentive mechanisms of policies are not fully matched; and the relationship between the central top-level planning and local pilot programs, and between regional financial reform and the macro policies needs to be deepened. Achieving the “dual carbon” goals through innovative investment and financing mechanisms depends on the following respects. First, we must have a grasp of China’s basic national conditions, learn from foreign advanced experience, apply the vision of sustainable development, observe the objective development law of green finance, and strengthen the top-level and coordinated planning of the investment and financing mechanism for the “dual carbon” goals from the perspective of national strategy. Second, we must establish a sound legal and regulatory system for financial support for the “dual carbon” goals. We should incorporate “low-carbon” elements into the existing financial laws and raise the low-carbon awareness and legal awareness among financial institutions. At the same time, we should encourage local governments to enact targeted, operable and applicable local laws and regulations on carbon-neutral development in light of local development, resources, environment, etc. Third, we must improve the investment and financing standard system for “dual carbon” goals. The investment and financing standard for “dual carbon” goals is fundamental for identifying low-carbon economic activities and channeling funds towards projects for “dual carbon” goals. At the same time, China should take initiative to leverage platforms such as the G20 to foster international exchanges and cooperation in green finance, promote green financial market and carbon finance market standards to align with international standards, and promote the convergence of green classification standards with countries that pursue innovative low-carbon development paths. We should foster international cooperation in green finance, jointly make progress in key issues such as information disclosure and standards on low carbon emissions, vigorously introduce world-class low- carbon technologies, and tell well the story of China. We should move faster to improve the investment and financing standard system as well as incentive and constraint mechanism under “dual carbon” goals, revise the green finance and carbon finance standard system in a timely manner in light of the constraining goal of carbon neutrality. We should build the foundation for “green + low carbon”, including evaluation standards for green projects and low-carbon project, evaluation and certification standards for green bonds and climate bonds, etc., and build and improve the pool of green and low-carbon projects. 2. Increase policy incentives and improve the system of performance evaluation for investment and financing under the “dual carbon” goals. The first is to use the government public funds to leverage more private capital and form policyoriented financial support for green and low-carbon industries. Policy banks and low-carbon transformation and development guidance funds should be established to revitalize private capital in the form of “government-led investment and follow-up private investment” through specialized management and marketoriented operation. The second is to establish and improve the investment and

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financing guarantee mechanism for the “dual carbon” goals, with attention paid to fostering cooperation with general guarantee institutions. At the same time, professional investment and financing guarantee agencies for the “dual carbon” goals should be established as soon as possible. It is recommended that governments set up low-carbon project risk compensation funds to support the operation of low-carbon guarantee institutions in the form of risk sharing. The third is to improve the fiscal and tax support system, and flexibly use fiscal and tax, financial and other policy instruments to guide fiscal funds to be used as incentives for the effective supply of investment and financing for the “dual carbon” goals, so as to achieve the most efficient use of fiscal funds and the best social, environmental and economic benefits. We should continue to improve the performance evaluation system of financial institutions in investment and financing for “dual carbon” goals., expand the application scope of evaluation results, establish a more effective financial incentive mechanism, and steer financial resources towards projects that help to achieve the “dual carbon” goals. We encourage local governments to coordinate the implementation plans and roadmap of the “dual carbon” goals in light of regional characteristics, industrial distribution, carbon emissions, location and technology, etc., and unveil a number of policies on low-carbon and zero-carbon transformation to incentivize large-scale emission reductions. We should establish a coordination mechanism for local governments, financial institutions and enterprises, leverage policy incentives and government funds to involve private capital in the construction of green and low-carbon cities, guide funds towards the green and low-carbon fields, increase the supply of green finance, and enhance the role of financial capital in the green transformation of industrial structure. It is necessary to fully mobilize local governments and local financial institutions to provide green finance and carbon finance, provide necessary policy guidance and financial support, expand local pilot programs such as green finance and climate financing, and gain experience in local green finance development that can be repeated and promoted. 3. Improve information communication mechanism, regulatory evaluation system and information disclosure system. The first is to establish an information exchange mechanism and a long-term linkage mechanism among financial institutions, financial regulators, environmental protection departments, fiscal and tax departments, intermediary agencies, etc. to ensure the unimpeded transmission of financial information and corporate environmental protection information as well as resource sharing among different departments. The second is to establish a mandatory environmental information disclosure system covering information on carbon emissions and carbon footprint step by step in line with the carbon neutrality goal, and guide and promote the concept of responsible investment. The third is to unify disclosure standards, improve the information management system, ensure more accurate information collection, and promote information sharing among financial institutions and enterprises.

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We should increase preferential loans for carbon emissions reduction, and improve the performance evaluation system of financial institutions for “green + low carbon” finance. It is recommended that financial institutions disclose the risk exposure of assets in high-carbon industries, and major assets and investment’s carbon footprint, and tighten the prudent management of climate change-related financial risks. We should use fintech and environmental, social and governance (ESG) investment to improve the efficiency of environmental information disclosure and carbon accounting, and more accurately identify and prevent financial risks.

Reference “Central Bank Governor Yi Gang: Making good use of normal monetary policy space to promote the development of green finance”, people.cn, March 22, 2021.

Chapter 6

Technological Innovations for Carbon Peaking and Carbon Neutrality Cong Jianhui, Li Rui, and Sun Panting

The realization of carbon peaking and carbon neutrality is not only an energy revolution, but a technological revolution as well. To date, China’s economic development is not yet completely decoupled from carbon emissions. The key to balancing development and emissions reduction is to cut technology costs, build new industries and create new drivers of growth through scientific and technological innovation. According to the report by the IEA issued in May 2021, half of the technologies needed to achieve net zero emissions in the world are still in the demonstration or embryonic stage. There is an urgent need for scientific and technological innovation. According to the research by the Administrative Centre for China’s Agenda 21, if China’s current policy, standards and investment level remain unchanged, the existing technology falls far short of meeting the carbon neutrality goal. Accelerated technological innovation is a key guarantee for achieving carbon neutrality.

1 R&D of Carbon Peaking and Carbon Neutral Technology Will Begin a New Wave of Global Competition in Science and Technology Carbon peaking and carbon neutrality will bring about systemic changes in the economic and social landscape, reshape the global energy geopolitics and macroeconomic development pattern, and fundamentally impact the energy security, industrial distribution, investment orientation, value chain status, trade structure, financial stability and employment potential of all countries in the world. Its significance is on C. Jianhui (B) · L. Rui School of Economics and Management, Shanxi University, Taiyuan, China e-mail: [email protected] S. Panting School of Economics, Shandong University, Jinan, China © China Financial & Economic Publishing House 2023 G. Zhuang and H. Zhou (eds.), China’s Road to Carbon Peaking and Carbon Neutrality, https://doi.org/10.1007/978-981-99-3122-4_6

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a par with the three industrial revolutions. In the past two decades, various countries have been in fierce competition in scientific and technological fields such as solar energy, wind energy, and new energy vehicles. In the context of the global move towards carbon neutrality under the Paris Agreement, the R&D of carbon peaking and carbon neutral technologies is bound to spark new global scientific and technological competition, which will determine the role and status of countries in the future global landscape. Many countries in the world are intensifying efforts to introduce science and technology innovation strategies for carbon peaking and carbon neutrality, such as South Korea’s “carbon neutrality technology innovation promotion strategy”, Japan’s “innovation strategy for innovative environmental technology”, the European Union’s European Green Deal, and the Biden administration’s “clean energy revolution and environmental justice proposal” . These strategies identify the needs of technology R&D in key areas and key departments as well as the key core technologies that require breakthroughs in their respective countries. There is now a trend of strategic competition in occupying the high ground for carbon neutral technology. In order to achieve the nationally determined contributions for carbon emission reduction under this situation, China has also begun to plan for scientific and technological innovation for carbon neutrality. General Secretary Xi Jinping said at the ninth meeting of the Central Committee for Financial and Economic Affairs, “We will promote major breakthroughs in green and low-carbon technologies, move faster to study cutting-edge low-carbon technology, accelerate the application of pollution and carbon emissions reduction technologies, and establish a sound evaluation and trading system for green and low-carbon technology as well as a technological innovation service platform.”1 The important instructions made by General Secretary Xi Jinping point the way forward for China to accelerate the R&D, promotion and use of green and low-carbon technologies for the “dual carbon” goals. According to the Working Guidance for Carbon Dioxide Peaking and Carbon Neutrality in Full and Faithful Implementation of the New Development Philosophy issued by the CPC Central Committee and the State Council on October 24, 2021, it is necessary to make technical breakthroughs in green and low-carbon development and promote their application, and formulate the action plan of technological support for carbon peaking and carbon neutrality to provide policy guarantee for the innovative development of green and low-carbon technologies in China.

1.1 Carbon Peaking and Carbon Neutral Technology is a Systematic Technical System Covering Low-Carbon, Zero-Carbon and Carbon Negative Technologies The technologies underpinning carbon peaking and carbon neutrality are generally called climate-friendly technologies or climate change response technologies, which 1

Xi Jinping (2021).

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is a systematic technical system comprising a series of technologies. Carbon peaking and carbon neutral technologies are classified differently according to different standards. According to the most commonly used classification method, they are divided into low-carbon technology, zero-carbon technology and carbon negative technology as per the degree of carbon emissions reduced.

1.1.1

Low-Carbon Technology

Low-carbon technology refers to a type of technology that can significantly reduce greenhouse gas emissions such as carbon dioxide with the purpose of improving the structure, saving energy, reducing emission, and improving energy efficiency. Such technologies, playing a major role in carbon peaking and carbon neutrality, are widely used in various fields, For example, the deep decarbonization technology for power systems such as ultra-supercritical power generation in the energy field, the technology of deep utilization of industrial waste heat in the industrial field, and green building materials technology in the construction field. Low-carbon technology can be divided into source carbon reduction technology (e.g. low-carbon industrial raw materials, low-carbon building materials, multi-energy complementary coupling), process carbon reduction technology (e.g. low-carbon industrial process reengineering, and efficiency improvement in key areas) and terminal carbon reduction technology (e.g. pollution and carbon emissions reduction synergy, non-CO2 greenhouse gas emission reduction) according to the location of carbon reduction in the industrial chain.

1.1.2

Zero Carbon Technology

Zero-carbon technology is a type of technology characterized by zero carbon emissions. It is also the fastest growing technology category with the most significant cost reduction that has attracted high attention in recent years. Zero-carbon technology is primarily divided into two categories: zero-carbon energy system technology (primarily including biomass energy, wind energy, solar energy, nuclear energy, hydrogen energy and other energy technologies as well as CCS technology) and zero-carbon process reengineering technology in key industries such as steel, chemical engineering, building materials, petrochemical engineering, and nonferrous metals. A more rigorous evaluation system judges whether a certain technology is zero-carbon technology based on not only its direct carbon emissions, but also its indirect carbon emissions or lifecycle carbon emissions. Zero-carbon technologies are developing apace worldwide but there are some problems that need to be solved. Wind power and photovoltaic power generation have very mature renewable energy-based power generation technologies, and their installed capacity has expanded rapidly and the cost has been slashed in recent years.

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From the perspective of employment, the development of wind power and photovoltaic power generation can create a large number of direct and indirect jobs. Moreover, wind power and photovoltaic power generation yield significant benefits in reducing local pollution and improving people’s health thanks to its replacement of traditional fossil energy sources such as coal-fired power generation. However, it is still facing technical obstacles to large-scale grid-connected stability and so on as well as inter-region transmission and infrastructure construction. In the future, extensive renewable energy grids, UHV transmission and other energy Internet technologies as well as energy storage technologies will be a key component of the zero-carbon technology system. Thanks to the advantages of accessibility, flexibility, etc. of biomass energy, meticulously designed bioenergy systems boast tremendous potential to provide sustainable fuels, so as to reduce carbon dioxide emissions. However, biomass energy carries a high economic cost. Under the current mature power supply technology, biomass energy requires the highest power generation cost (over 0.6 yuan per kWh), which is even higher than that of nuclear power. The large-scale application of biomass- based power generation technology is also impeded by land use and water resources. The development and utilization of nuclear energy is an option for low-carbon development in various countries. Nuclear technology is one of the few alternative technologies expected to achieve zero carbon emissions in the absence of wide application of CCS technology and its efficiency improvement. Nuclear energy has great advantages in terms of technological maturity, cost effectiveness, etc., but it also faces challenges in terms of the supply chain, cost effectiveness, security, political factors, social acceptance and so on. Hydrogen energy technology plays an important role in reducing emissions and creating jobs, and transportation, industry, construction, hydrogen-based power generation, and other sectors become the main industries for the rapid development of hydrogen energy, but the technology is not yet mature, and the value chain is highly complex. The production of low-carbon hydrogen requires renewable energy-based power generation and energy supply as well as lower-cost electrolyzer development. In terms of storage and transportation, the technology development trend is unclear, and extensive infrastructure is required for the utilization of hydrogen energy.

1.1.3

Carbon Negative Technology

Carbon negative technology refers to a type of technology that can absorb greenhouse gases such as carbon dioxide, thereby reducing the volume and concentration of greenhouse gases in the atmosphere, which is equivalent to generating “negative” emissions. The main category of carbon negative technology is carbon dioxide removal (CDR) technology, which is a type of technology that removes carbon dioxide emitted into the atmosphere by technical means from the atmosphere and stores it in geological reservoirs and terrestrial ecosystems. Carbon negative technologies include biomass energy CCS, afforestation and reforestation, soil-based carbon sequestration and biochar, enhanced weathering (EW) and ocean alkalinity enhancement (OAE), direct air carbon capture and storage (DACCS), and ocean

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fertilization. The conditions of each type of technology are shown in Table 6.1. At present, carbon negative technology is much debated and controversial. On the one hand, the vast majority of studies show that carbon negative technology is essential for achieving the carbon neutrality goal. It requires a larger application of carbon negative technologies earlier. By using negative emission technology, we can achieve zero emissions without completely phasing out fossil energy, thereby reducing the cost of rapid social transition. On the other hand, the development of carbon negative technology is also uncertain. For example, BECCS technology requires the raw material of biomass, which consumes a great deal of land and water resources for its cultivation. Aside from afforestation and reforestation technology, other CDR technologies are immature and expensive, and there may be great technical risks as well as ecological environmental risks. Furthermore, solar radiation management (SRM) technology that “directly cools” the Earth by influencing solar radiation has also attracted the attention of scientists, but it is still less technologically mature. There is little overall research, and it is not verified by large-scale experiments. Its development prospects and implementation effects are hotly debated. Table 6.1 Main carbon negative technologies Technology type

Description

Bioenergy with Biomass is a carbon sink. When used as an energy source, it is combined with carbon capture CCS technology to prevent carbon dioxide from being released into the and storage atmosphere and stores it underground in a directional manner (BECCS) Afforestation and reforestation (AR)

Grow trees on the land that does not have forest cover for a long time

Soil-based carbon sequestration and biochar

Increase the organic and inorganic carbon content in the soil, and sequestrate atmospheric carbon dioxide in soil carbon pools, including physical carbon sequestration and biological carbon sequestration

Enhanced weathering (EW) and ocean alkalinity enhancement (OAE)

Weathering refers to the natural process of decomposing rocks through physical and chemical reactions based on the natural consumption of carbon dioxide. It converts them into solid or dissolved alkaline bicarbonates or carbonates. Ocean alkalinization increases the ocean’s capacity for carbon dioxide absorption and buffering by increasing regional marine alkalinity

Direct air carbon capture and storage (DACCS)

Capture carbon dioxide from ambient air through chemical processes and store it in geological structures

Ocean fertilization

A technology that adds nutrients to the oceans to increase biomass, leading to carbon sequestration in deep-sea or seabed sediments after carbon fixation

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As the basic technologies of modern society, digital technology, AI, Internet, blockchain, quantum technology and other technologies are being extensively applied to various fields of economy and society, bringing new opportunities and challenges to the development of carbon peaking and carbon neutral technology. Through production process management and monitoring, information transmission, optimized resource allocation, cost savings, etc., technology fusion can enhance the potential and effect of climate-friendly technologies in emission reductions, and even give birth to game-changing technologies to fundamentally alter the global climate governance pattern. At present, such technology fusion is still in its infancy, but new technologies, new industries, and new forms are emerging, promising great room for development.

2 The Policy System for Carbon Peaking and Carbon Neutral Technological Innovation is Taking Shape As the understanding of the low-carbon economy increases in China, especially after the 18th CPC National Congress regarded “ecological conservation” as an important strategy and set the “green, low-carbon, and circular development” as the focus of ecological conservation, various government departments concerned have issued a slew of promotion policies for low-carbon technology development. These policies require the comprehensive use of different tools such as legislation, government administration, market, and information, and cover all stages of technological development such as technology R&D, technology demonstration, technology promotion and industrialization. The policies cover various fields of low-carbon technologies such as carbon reduction, zero carbon, and carbon negative, as well as key industries such as steel, cement, construction, and transportation. Initial progress has been made in establishing a complete policy system for the development of low-carbon technologies. The policies and measures introduced by the state for the low-carbon development goals since the 12th Five-Year Plan primarily include six respects. First, issue various administrative plans in rapid succession to guide the development of low-carbon technologies. In addition to giving prominence to “strengthening scientific and technological support” in comprehensive plans such as China’s National Plan on Climate Change (2014–2020), Guiding Opinions on Building a MarketOriented Green Technology Innovation System, Working Guidance for Carbon Dioxide Peaking and Carbon Neutrality in Full and Faithful Implementation of the New Development Philosophy of the CPC Central Committee and the State Council, and Action Plan for Carbon Dioxide Peaking Before 2030, China also issued special plans for specific fields such as the National Special Technology Development Plan for Carbon Capture, Utilization and Storage During the 12th Five-Year Plan Period and the Special Plan for Technological Innovation to Tackle Climate Change During the Thirteenth Five- Year Plan Period. Second, enact laws and regulations to

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support the development of carbon reduction technology. For example, the Law of the People’s Republic of China on Conserving Energy, the Renewable Energy Law of the People’s Republic of China, the Law of the People’s Republic of China on Promotion of Cleaner Production, and the Law of the People’s Republic of China on Promoting the Circular Economy provide legal support for the R&D and application of climate- friendly technological innovation achievements. Third, attach importance to the role of market mechanisms and build market trading platforms to incentivize the development of low-carbon technologies. Since 2011, Beijing, Tianjin, Shenzhen, Shanghai, Hubei and Chongqing have piloted the operation of a carbon market. In 2017, the national unified carbon market was launched. In July 2021, the national carbon market launched online trading. Already in operation are pollutant emission right trading market, energy use right trading market, renewable energybased green electricity certificate market, etc. These are aimed at incentivizing the application of low-carbon technologies through market means. Fourth, continuously increase fiscal, tax and financial support. In addition to ramping up fiscal investment to promote the basic research on low-carbon technologies, China has also issued the Implementation Opinions on Government Procurement of Energy-saving Products, Implementation Opinions on Government Procurement of Environmental Label Products, the Circular of the General Office of the State Council on Establishing Rules for Compulsory Government Procurement of Energy-saving Products, etc., which have become green procurement rules for compulsory procurement and priority procurement of low-carbon products. Moreover, the Guiding Opinions on Building a Green Financial System, the Guidelines for Green Credit, and the Key Evaluation Indicators for the Issue of Green Credit have established a framework system of green finance and green credit to support the development of low-carbon technologies. Fifth, improve the intellectual property system and optimize the examination mechanism for low-carbon technology patents. According to the measures for the administration of intellectual property rights such as the Administrative Measures for the Priority Examination of Invention Patent Applications and the Measures for the Administration of Priority Examination of Patents, the examination of applications for green patents shall take precedence over other patent examinations, and the scope of patents for the priority examination of green, low-carbon technologies is clearly defined. Sixth, release low-carbon technical information continuously and build technical exchange platforms. The ministries and commissions concerned have announced the List of Energy Conservation, Emission Reduction and Low-carbon Technology Achievement for Commercialization and Promotion two times, National Catalog of Low-Carbon Technologies for Key Promotion three times, and National Catalog of Key Energy- saving Technologies for Promotion six times in an effort to promote low-carbon technologies in society, reduce market asymmetry in the choice of low-carbon technologies, and explore mature low-carbon technology promotion models. The Opinion on Developing Unified System of Green Product Standards, Certification and Labeling of the General Office of the State Council was issued to help consumers obtain information on green and low-carbon technologies and guide low- carbon consumption. Moreover, green technology banks, etc. have been set up as a green technology information platform, transfer and commercialization platform

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and financial platform, aiming to accelerate the transfer and commercialization of green and low-carbon technological achievements.

3 Achievements and Challenges Coexist in Carbon Peaking and Carbon Neutral Technology Development Since the 18th CPC National Congress, China has made great strides in the establishment of a climate-friendly technological innovation system by planning and implementing a series of scientific and technological plans. First, the large-scale application of major emission reduction technologies helps realize national emission reduction targets ahead of schedule. The application of major emission reduction technologies such as energy efficiency improvement and renewable energy since 2005 has cumulatively cut carbon dioxide emission by 4.2 billion to 5 billion tons, contributing 48 to 67% of China’s target of reducing carbon intensity by 45%. As a result, this goal was achieved two years ahead of schedule at the end of 2018. It also produces good environmental governance synergies. Second, major breakthroughs have been made in the R&D of key adaptive technologies, ensuring the country’s stability and our people’s wellbeing. The “sky-ground-air” global change observation (monitoring) network, prediction and early warning system as well as data set have been developed and put into use, which has considerably enhanced China’s capabilities in weather forecasting, disaster prevention and mitigation as well as emergency management. The climate change risk evaluation technology has ensured the safety and stability of major national projects such as the South- North Water Transfer Project, the Three Gorges Water Conservancy Project, the Qinghai-Tibet Railway, and energy and chemical engineering bases. Third, some advanced technologies have been commercialized, bringing significant economic and social benefits. For example, China’s ultra-supercritical units rank first in the world in terms of technology level, development speed, installed capacity and number of units, making significant contributions to improving the structure of the thermal power industry, comprehensively improving the efficiency of coal-fired power generation, and cutting pollutant emissions. Ultralow energy consumption green building technology was used to build Beijing Winter Olympic venues to practice the concept of “green Olympics”. The output of new energy vehicles based on renewable energy technology grows by 87.5% annually on average, with its sales volume accounting for more than 50% of the world’s total, thus consistently changing the global automotive industry landscape. The national smart grid underpinned by digitalization and grid integration technology has a market scale of nearly 80 billion yuan, and the equipment system is internationally competitive, both of which promote the revolution of energy production and consumption. Compared with developed countries, China faces challenges in the development of carbon peaking and carbon neutral technologies. First of all, China falls short of the international advanced technical level. With a weak capacity for independent innovation in climate technology, China also obviously lags behind developed countries in

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terms of overall research level. China leads the world in 10% of technologies, keeps abreast of other countries in 35% of technologies, and follows other countries in 55% of technologies. China falls behind developed countries by about 15 years in terms of the overall technology. It is difficult to import key technologies from developed countries or technologies imported are of mediocre quality. China is subject to factors such as the willingness of developed countries to transfer technology, and market competition, and has the risk of being controlled by developed countries in terms of some key core technologies. Second, the overall commercialization rate of technology is low. First, the supply and demand of climate change response technologies are not effectively matched. While over 30,000 pieces of technological achievements at or above the provincial and ministerial levels are produced every year, and there is a wealth of patents, only about 36% of technological achievements are commercialized, of which only 10 to 15% (about 40% in developed countries) can be promoted on a large scale and produce economies of scale. Second, the cost of R&D in technology as well as the cost of commercialization and application are generally too high. In addition to the costs of technology transfer and use, enterprises also need to pay costs for production equipment, personnel, venues, etc. Third, the role of the market mechanism in technology promotion, commercialization and application is still limited. The national carbon market for promoting technological innovation in response to climate change is still in the pilot and preliminary stage of establishment. Fourth, national technology intermediary organizations are underdeveloped, and the mechanism for accreditation and certification for low-carbon technology products is not standard, which affects technology commercialization.

4 Development Path of Typical Technologies Inspires Future Technological Innovation for Carbon Neutrality At present, technologies for carbon peaking and carbon neutrality are mostly costly or immature, but some technologies see significant cost reductions after a period of rapid development and become eligible for large-scale promotion and application. The development path of typical technologies is a great inspiration for the path of future technological innovation for carbon neutrality. As important zero-carbon technologies, solar and wind energy technologies attract much attention in the course of technological development and commercialization. In the infancy of technological development, the cost of solar and wind energy was far higher than that of thermal power, but the two technologies have developed apace. Since 2010, the cost of solar photovoltaic power generation, onshore wind power and offshore wind power generation fell by 82%, 39% and 29% respectively. At present, its cost per kilowatt hour of electricity is close to that of thermal power, and grid parity is about to be realized. Cost reduction is driven by factors such as clear policy incentives, sufficient market competition, substantial nongovernmental investment, etc. From 2015 to 2019, the installed capacity of wind power and photovoltaic power

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increased markedly: increased from 130 to 210 GW for wind power, accounting for one-third of the world’s total; increased from 42 to 210 GW for photovoltaic power, accounting for one quarter of the world’s total. It is noteworthy that since the outbreak of the COVID-19 epidemic in 2020, power generation based on renewable energy such as wind and photovoltaic power still maintains positive growth, becoming the only energy source that maintains positive investment growth. As technology advances, the cost of photovoltaic power generation is expected to decline by another 30%. As the world’s largest investor in renewable energy, China has become a world leader in this field, both in terms of technology and commercialization. As a key means of the energy transition, hydrogen energy has developed at a fast clip in recent years. With immature technology and high cost, hydrogen energy is still in the infancy of industrial development. However, the hydrogen energy industrial chain will develop rapidly as renewable energy or nuclear hydrogen production technology becomes mature, breakthroughs are made in the core technology of hydrogen fuel cells, and related infrastructure for charging and transportation, etc. are improved. The cost of “green hydrogen” production is expected to decline by 60% in 10 years, and “gray hydrogen” will be crowded out of the market around 2030. In the next 10 to 20 years, hydrogen energy will become increasingly important, and be widely used as a raw material and heating energy source to help decarbonize the carbon reduction industries such as steel, construction, and transportation. CCUS technology has a significant impact on energy transition by enabling the sustainable use of fossil fuels, slowing down fossil fuel withdrawal, and mitigating the social impact of fossil fuel withdrawal. The utilization of CCUS technology has expanded rapidly over the past 10 years. By 2020, the global carbon dioxide capture capacity reached 40 million tons (in order to achieve the Paris Agreement targets, it may require a global carbon capture capacity of one billion tons per year). At present, China’s CCUS projects are in the demonstration stage. The construction of China’s first million ton CCUS project —“Qilu Petrochemical-Shengli Oilfield CCUS Project” commenced on July 5, 2021. According to calculation, it can reduce carbon dioxide emissions by one million tons per year after completion, equivalent to planting nearly nine million trees or suspending the use of nearly 600,000 economic cars for a year. The study shows that China will rely on CCUS technology to neutralize carbon emissions of over one billion tons. It is necessary to make further breakthroughs in frontier and storage technologies such as “CCUS + new energy”, “CCUS + hydrogen energy”, and “CCUS + biomass energy”, which can lead to clean fossil energy, large-scale clean energy, and low-carbon production process. The typical development path of carbon peaking and carbon neutral technologies gives us an important inspiration. The first is to resolutely embrace the era of carbon neutral technology. Despite difficulties in technological development, carbon neutral technology replacing high carbon technology has been a historical necessity since the global carbon neutrality goal is set. The second is to firmly believe that major breakthroughs in scientific and technological innovation will be made to support the realization of the carbon neutrality goal. National policy support and adequate market competition will significantly lower the cost of technologies. Most of the

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technologies seem to be difficult to be fully promoted in the early stage of development, while thanks to clear policy guidance and demand, increased R&D efforts and growing market investment will lead to a continuous reduction in technology costs, and eliminate the “green premium”. This is also the law of the “learning curve” for technological development. The third is to build up our confidence in gaining a leading edge in carbon neutral technology through hard work. China has incomparable institutional strengths such as bringing together the resources needed to accomplish great tasks, as well as market advantages such as a super-large-scale market. Therefore, it can pool efforts to remove technological bottlenecks and gain a leading edge and market competitiveness in many major core technologies in key industries. The fourth is to encourage and support the development of carbon neutral technology in local regions, and create conditions for and contribute to the local development of carbon neutral technology through policy publicity, provision of information, etc.

5 Main Direction of Future Technological Innovation for Carbon Peaking and Carbon Neutrality Scholars have reached a consensus on the role of technological innovation in achieving the “dual carbon” goals. For China, it is necessary to formulate a roadmap for technological innovation for carbon peaking and carbon neutrality in light of its national conditions, and send clear policy signals to the market. The following areas are the key. The first is to promote forward-looking research, classified promotion and planning regarding strategic technologies. Further planning should be made in the areas such as relatively mature zero carbon power, zero carbon non-electricity energy, zero carbon industrial process reengineering, low carbon technology integration, CCUS technology and carbon sink technology. It is preferable to vigorously promote wind power and photovoltaic power generation on a large scale on the basis of preventing ecological risks. The cost of biomass energy must be dramatically reduced, and more appropriate geographic space is needed for planning. While CCUS technology is not widely used and its efficiency needs to be improved, nuclear energy technology is one of the few alternative technologies expected to achieve zero carbon emissions. Whether to scale up its development needs to be further studied. In addition to the cost, further research must be conducted on the production methods, modes of storage and transportation, supporting infrastructure, etc. of hydrogen energy. It is urgent to make major developments and breakthroughs in smart grid, energy storage technology, pollution and carbon emissions reduction synergy, and non-CO2 emission reduction technology. For negative emission technologies such as carbon dioxide removal, we must systematically consider their comprehensive cost-effectiveness and risks, flexibly choose the time and scale of development, and carry out research, demonstration and promotion to the extent practicable.

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The second is to innovate fossil energy utilization technologies. Whether fossil energy should be phased out is a focus of attention and debate in the field of carbon neutrality. For resource-dependent areas whose economic development is heavily dependent on fossil fuels and where economic transition has not yet been completed, the development path for carbon peaking and carbon neutrality such as rapid “decoaling” may bring risks such as stranded assets, high sunk costs, and job losses. Exploring new ways and means of using fossil energy (such as increasing the proportion of fossil fuels as raw materials), and integrating them with the carbon peaking and carbon neutral technology systems and production systems can reduce the cost of social transformation caused by the rapid technology transformation while leveraging the contribution of fossil energy. The third is to guide game-changing technological innovation. We should establish institutional mechanisms conducive to game-changing technological innovation, encourage interdisciplinary exchanges across fields, and promote green and lowcarbon industries’ deep integration with emerging technologies such as the Internet, big data, AI, and fifth-generation mobile communications (5G). According to studies, the use of digital technologies in energy, manufacturing, transportation and other sectors will help reduce global carbon emissions by 15 to 37%. Technology integration and technology coupling cross the industrial chain can easily produce gamechanging technologies, which cut the cost of carbon emissions and dramatically reduce carbon emissions while improving people’s quality of living. The fourth is to achieve self-reliance in science and technology, and make breakthroughs in core technologies in key industries. Given the competitive situation in carbon neutral technology, we should establish a mechanism to identify and track the key core technologies for carbon peaking and carbon neutrality, judge the direction of global technology development through a comprehensive evaluation system, predict future technological development more accurately, and make advance planning to seize opportunities in key areas. Moreover, we should step up efforts to judge the localization level of key core technologies, the security of the supply chain, etc. on a regular basis. It must be recognized that some technologies with a long industrial chain and high relevance are only competitive in some fields and some links, and there is no entire industrial chain for technology as a whole. Regarding such technologies, we must guard against the risk of bottlenecks imposed by other countries. We must do a good job in building, improving, extending, and supplementing the industrial chain, and work to gain the initiative in technological development to ensure a safe and stable supply chain.

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6 The System for Promoting Carbon Peaking and Carbon Neutral Technology Technology promotion guarantees the maximum efficiency of technology. In terms of the existing technologies for tackling climate change, technologies vary from region to region in China, and the promotion of the existing technologies across regions is expected to bring huge potential for carbon reduction. China has now built a multiplayer, coordinated work system for promoting technologies for climate change, and remarkable benefits have been made. Preparing a list of technologies is the principal way to promote the diffusion and transfer of technology in China. The National Development and Reform Commission, the Ministry of Science and Technology, the Ministry of Industry and Information Technology, the Ministry of Transportation and other government bodies have prepared many lists of technologies to be promoted for tackling climate change, such as the National Catalog of Key Energy- saving Technologies for Promotion (2008– 2013), the National Catalog of Key Energy-saving and Low-Carbon Technologies for Promotion (2014–2017), the Catalog of Green Technologies for Promotion (2020) and the Catalog of Key Energy-saving and Low-Carbon Technologies for Promotion in the Transportation Industry. These are committed to promoting the application of climate-friendly technologies. The lists of technologies generally contain technologies that have the potential to reduce carbon emissions, can yield good economical and demonstration benefits, and are in line with the long-term technological development trend of industries. For example, in the “energy- saving part” of the National Catalog of Key Energy-saving and Low-Carbon Technologies for Promotion (2017), the potential of carbon emission reduction by 260 technologies such as microgrid energy storage application technology, photovoltaic energy-driven frequency conversion technology, and bamboo forest carbon sequestration and emission reduction technology totals about 603 million tons. Green finance, standards for climate investment and financing projects, and carbon markets are key incentive mechanisms for promoting climate-friendly technologies. At present, more than 60 institutions in China have applied fintech to green finance scenarios, such as using the green finance information platform to achieve matching with high-quality green projects of enterprises, and prioritizing financing for some green and low-carbon technology projects that use renewable energy technologies. Zhejiang, Jiangxi, Guangdong, Guizhou, Gansu, Xinjiang and other provinces (autonomous regions) have made it clear that the use of climate-friendly technologies such as clean energy, green transportation, and green buildings is a prerequisite for green finance project operation, green fund investment, and green credits, with a view to guiding investment towards the carbon neutral technology field. In July 2021, the online trading of the national unified carbon market marked the launch of the world’s largest carbon market. Through the carbon market mechanism, carbon emissions are denominated in prices, and market funds are guided to invest in energysaving and carbon-reduction technologies to obtain benefits on the carbon market.

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This will further improve the promotion coverage and efficiency of carbon neutral technologies. The international cooperation mechanism for technology transfer is a key channel for promoting carbon neutral technologies. Cooperation in carbon neutral technologies offers a key channel for China to foster international cooperation and build a community with a shared future for mankind. As an active participant in and contributor to global climate governance, China has been comprehensively involved in the international climate technology transfer system and has initially established a comprehensive international cooperation mechanism for technologies. The first is to participate in technical, financial and other mechanism activities under international conventions. For example, Chinese experts serve as members of the Technology Executive Committee (TEC); 11 Chinese institutions become the technical support units of the Climate Technology Centre and Network (CTCN), and a Chinese person serves as the chairman of the CTCN Advisory Committee that aims to enhance the capabilities of developing countries in low-carbon and climate change adaptation technologies. Moreover, research institutions such as Tsinghua University, with the support of the Global Environment Facility (GEF), have completed the evaluation of China’s climate technology demand. Second, China has accepted some technology transfers from developed countries through participating in China Clean Development Mechanism Fund (CDM) projects, joint ventures, cooperative R&D, personnel exchanges, etc. For example, by 2017, 3807 CDM projects had been registered and implemented in China, accounting for nearly half of the world’s total. About 30% of these projects in renewable energy, energy efficiency, greenhouse gases and other fields require technology transfer. The third is to promote the transfer of climatefriendly technologies to developing countries and to establish bilateral cooperation in technology. Under the framework of South-South cooperation, technology transfer to developing countries is promoted through the sharing of development experience and technical expertise, assistance in multiple areas, the preparation of the Appropriate Technology Manual for South-South Cooperation in Science and Technology to Address Climate Change as well as encouraging enterprises to provide technology licensing, sell technology, make external investment, provide technical services, etc. The fourth is to cultivate a full variety of technology transfer platforms. China has set up funding mechanisms such as the “China South-South Climate Cooperation Fund”, the Asian Infrastructure Investment Bank, New Development Bank, and the Silk Road Fund, as well as institutions and specialized intermediary organizations specializing in international technology transfer, such as the Green Technology Bank, the Belt and Road Environmental Technology Exchange and Transfer Center, and China-Arab States Technology Transfer Center. Scientific and technological innovation is the primary driver for carbon peaking and carbon neutrality, and the key to ensuring the realization of the “dual carbon” goals as well as economic and social development. Global competition for carbon peaking and carbon neutral technologies is intensifying. To achieve the goal of carbon neutrality, China is moving faster to establish a market- oriented green and lowcarbon technology innovation system, and promote the R&D of low-carbon frontier

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technologies, commercialization and international cooperation and transfer of technology, so as to seize the technology high ground and become a strong power in carbon neutral technology. Party members and cadres involved in technology policies formulation, technical information provision, technology publicity and promotion will play a unique and critical role in technological innovation for carbon neutrality.

Reference “Xi Jinping presides over the ninth meeting of the Central Committee for Financial and Economic Affairs, stressing the need to promote the regular, healthy and sustainable development of platform economy and to incorporate emission peak and carbon neutrality into China’s overall plan for ecological conservation”, People’s Daily, March 16, 2021.

Chapter 7

Change of Consumption in the Context of Carbon Peaking and Carbon Neutrality Bo Fan

Consumption is a basic part of the performance of the national economy. In 2020, China’s final consumption expenditure accounted for 54.3% of GDP. Consumption has become the primary driver of China’s economic growth. At the same time, energy consumption and carbon emissions from the personal consumption sector are also increasing. Therefore, controlling consumption- side carbon emissions is also a key player in carbon peaking and carbon neutrality. We can guide micro entities such as individuals or families to choose low-carbon products and services, raise awareness of conservation, and recycle resources, which can not only directly reduce carbon emissions caused by final consumption, but indirectly promote enterprises to change modes of production and provide more low-carbon and high-quality products. This offers a win- win and feasible path for achieving carbon reduction goals while improving people’s quality of life.

1 Follow the Global Trend of Low-carbon Consumption Consumption is the behavior of satisfying needs, including consumption for production and consumption for living. Achieving carbon peaking and carbon neutrality is a systematic program that requires changes in ways of production such as industrial restructuring and technological improvement, as well as changes in the way of life such as mobility and housing. At present, China’s policies are mostly focused on production-side carbon reduction, while consumption-side carbon reduction is constrained and rarely guided. Low- carbon consumption in this chapter specifically refers to the issue of carbon emissions in the field of consumption for living. B. Fan (B) Department of Economics, Party School of the CPC Beijing Municipal Committee, Beijing, China e-mail: [email protected] © China Financial & Economic Publishing House 2023 G. Zhuang and H. Zhou (eds.), China’s Road to Carbon Peaking and Carbon Neutrality, https://doi.org/10.1007/978-981-99-3122-4_7

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1.1 Change Towards Low-Carbon Consumption Has Become a Global Consensus Consumption is the ultimate goal of production. While the world’s carbon emissions are primarily concentrated in the production field, it depends on energy saving and carbon reduction on the consumption side to promote the overall transformation of the pattern of economic development. According to the studies by the Energy Foundation, the carbon dioxide emitted by household consumption in developed countries account for 60% to 80% of the total carbon emissions, while the level of carbon emissions by Chinese residents is close to that in Switzerland in 1970, but China still lags far behind developed countries such as Britain and the United States.1 The BP Energy Outlook (2019) stresses that the construction and transportation sectors will account for 29% and 21% of global energy consumption by 2040 respectively as the living standards improve in India, China and other Asian regions. Therefore, the general public recognizing and practicing low-carbon consumption has increasingly become the consensus of the international community. Household energy consumption is the terminal link of energy consumption. Activities in residents’ lives such as cooking, heating, lighting, and transportation require energy consumption. Carbon dioxide is emitted throughout the lifecycle of products and services such as development, production, distribution, use and recycling. According to the calculations by the IEA, the percentage of carbon emissions from household consumption is increasing year by year, with a growth rate higher than that of the industrial sector. State Grid’s Global Energy Review and Outlook (2020) predicts that from 1980 to 2050, the proportion of energy consumption demand for industry and commerce in the terminal energy demand sector will decline slightly in the context of the accelerated global low-carbon transition, while the demand for energy consumption in the construction and transportation fields, which are closely associated with residents’ lives, will gradually increase. Energy demand-side management has attracted global attention since the 1970s. For energy demand-side management, the energy sector (primarily the electricity sector) as the supplier adopts incentive policies such as fiscal and tax policies to encourage the users to embrace effective energy-saving technologies, changes the ways of energy demand, effectively reduces energy consumption and load level, and cuts primary energy consumption under the premise of ensuring energy services. Energy saving, clean energy substitution, and energy efficiency improvement under energy demand-side management are the key means of low-carbon consumption. Moreover, low-carbon consumption also includes waste recycling, trade in the carbon sink, etc. The focus on reducing energy consumption and carbon emissions at the consumer demand side of the consumption transformation in the context of carbon peaking and carbon neutrality, as well as the resulting low-carbon way of life can be summarized as “low-carbon consumption”. Low-carbon consumption directly or indirectly 1

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reduces carbon dioxide emissions. On the one hand, consumers fully assess carbon dioxide emissions when purchasing, using and disposing of consumer goods, make consumption based on the lowest carbon emissions, choose low-carbon products and mobility, and save resources and energy, which can directly cut consumption-side carbon emissions. On the other hand, consumers’ demand for low-carbon products and services will guide the development and utilization of raw materials, processing, transportation, storage and recycling, etc. in accordance with low-carbon guidelines. In this way, low-carbon consumption demand will drive low-carbon production and promote the transformation of the economy as a whole.

1.2 China Promotes Economic Transformation Through Low-carbon Consumption China has a huge population with tremendous consumption capacity. Promoting lowcarbon consumption is the main basis for China to fulfill carbon reduction tasks. It is also a key way to innovate consumption models, stimulate domestic demand, and improve the living standards of residents. In China, energy demand for the residents’ lives is rising. At present, nearly 70% of China’s energy consumption takes place in industry, while energy consumption for residents’ lives accounts for about 11%, mainly in the fields of industrial products, construction and transportation. Judging from the proportion of carbon dioxide emitted by terminal demand activities, 35% of China’s carbon emissions stem from household energy consumption. In particular, as urbanization deepens rapidly, the volume of carbon emissions caused by household consumption will continue to grow. The importance of controlling consumption-side carbon emissions is self-evident. At the same time, unreasonable ways of life will also aggravate the shortage of energy resources. It is necessary to create better conditions through policies, product development, market cultivation, etc. to help consumers adopt a low-carbon way of life. The potential for consumption-side carbon reduction in China is huge. According to the Analysis of the Potential of Low-carbon Household Consumption in Big Cities (2020), if people in China’s big cities with a population of more than 10 million use low-carbon products or services for basic necessities of life, the average annual emission reduction potential of personal consumption will exceed one ton, or about oneseventh of the per capita carbon emissions in China. At the same time, as the consumer psychology of Chinese consumers becomes more mature, more and more consumers pay attention to information on sustainable development of enterprises and products, and are more willing to buy green and low-carbon products. This will help to prompt enterprises to conduct green production, fulfill corporate environmental responsibilities, and lead to green ways of work and life.

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2 Deepen Understanding of Low-Carbon Consumption Low-carbon consumption features the control of energy consumption and carbon emission caused by consumption. A globally used concept is green consumption. Similar terms include sustainable consumption, ecological consumption, environmentally friendly consumption, and energy-saving consumption. These concepts have different focuses, but all aim to achieve the balance of protection and development.

2.1 Analysis of the Concept of Low-Carbon Consumption 2.1.1

Green Consumption

Green consumption refers to a model of consumption that minimizes the negative impact of individual behavior on the ecological environment while satisfying human needs. Since green consumption has a broad meaning, low-carbon consumption is usually considered a “sub-concept” of green consumption. Green consumption is defined from the perspective of regulating consumption behavior. The Green Consumer’s Guide published in Britain in 1987 defines “green consumption” as: avoiding the consumption of the following commodities: commodities that endanger the health of consumers and others; commodities that consume a great deal of resources; goods that are unnecessarily consumed due to excessive packaging; commodities derived from rare animals or natural resources; commodities containing cruelty to animals or unnecessary deprivation; commodities that adversely affect other countries, especially developing countries. The Circular on Guiding Opinions on Promoting Green Consumption issued by China in 2016 also stipulates consumer behavior: the consumption behavior characterized by resource saving and environmental protection is primarily manifested as practicing economy and thrift, reducing loss and waste, choosing efficient and environmentally friendly products and services, as well as reducing resource consumption and pollution discharges in the consumption process. From the perspective of the lifecycle of products and services, green consumption covers green products, material recycling, energy efficiency improvement, and environmental protection. The basic characteristics can be summarized as saving resources and reducing pollution, reevaluating environmentally friendly purchases, reusing, recycling, and rescuing all things in nature.

2.1.2

Sustainable Consumption

Sustainable consumption follows the basic principles of sustainability, fairness and commonality. It stresses that consumption patterns and product manufacturing meet

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the requirements of conservation and environmental protection. The report entitled Policy Factors for Sustainable Consumption issued by United Nations Environment Programme (UNEP) in 1994 in Nairobi defines “sustainable consumption” as “providing services and relevant products to meet basic human needs and improve the quality of life while minimizing the use of natural resources and toxic materials, and discharging wastes and pollutants as little as possible during the lifecycle of services or products, so as not to endanger future generations”. In 2002, the World Summit on Sustainable Development (WSSD) adopted the Johannesburg Plan of Implementation, calling for global action. A 10-year plan framework was established for countries and regions in the world to move faster towards sustainable consumption and production models. With reference to the definition of sustainable development, Chinese scholars define sustainable consumption as consumption that can meet the consumption needs of current people without endangering the ability of future generations to meet their needs of consumption and development.2

2.1.3

Ecological Consumption

Ecological consumption primarily emphasizes that consumption behavior is premised on not destroying ecosystem functions and services. Consumption conforms to the development level of material production for humans, and is also within the carrying capacity of the ecological environment; meets the basic human needs without causing harm to the ecological environment. Its consumption pattern and content are in line with the requirements of ecosystem operation. It is a model of consciously regulated and moderate consumption conducive to environmental protection and consumer health.

2.1.4

Low-Carbon Consumption

According to the Interim Measures for the Administration of Certification of Lowcarbon Products issued by China, a “low-carbon product” is defined as a product whose carbon emission value meets the relevant evaluation standards or the requirements of technical specifications of low-carbon products compared with like products or products with the same functions. Low-carbon consumption is judged based on the low energy consumption, low pollution and low emissions during the purchase, use and recycling of low-carbon products (including intangible services). Low-carbon consumption in a broad sense includes low-carbon consumption for production and living. Low-carbon consumption for production emphasizes the reduction of energy consumption and carbon emissions in all social and economic activities, including the energy consumption of enterprises as well as product consumption.3 Low-carbon consumption in the narrow sense refers to consumption for living purposes, that is, a 2 3

Zhuang Guiyang (2019). Liu Wenlong and Ji Rongrong (2019).

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low-carbon way of life. It is the behavior and process of meeting personal needs by choosing low-carbon products and consumption methods. Given the lack of systematic policies for promoting low-carbon consumption for living in China, low-carbon consumption is defined here as low-carbon consumption for living. In the short term, consumption for construction, transportation and household appliances requires the largest energy consumption and generates the most carbon emissions. It is the focus of low-carbon consumption practices in various countries. However, in the long run, global low-carbon consumption should also be combined with conservation, recycling and green consumption, so as to cover all areas of consumption for living such as food, clothing, housing, transportation and other daily necessities, thereby reducing carbon emissions in the consumption process across the board.

2.2 Characteristics of Low-Carbon Consumption Low-carbon consumption covers many areas. According to the definition given by the National Bureau of Statistics, residents’ consumption for living includes eight categories: food, clothing, articles for daily use and services, medical care, transportation and communications, education, culture and entertainment services, housing, as well as miscellaneous commodities and services. Correspondingly, low-carbon consumption means that in the above categories.4 It can be divided into the choice of low-carbon mobility, the choice of low-carbon clothing, the choice of low-carbon food, energy saving and other acts of using low-carbon products. On World Environment Day in 2008, the UNEP put forward seven proposals for a low-carbon way of life, including saving electricity, saving water, and using rail transit, calling for public action for energy conservation and emission reduction in daily activities. Low-carbon consumption must be ultimately manifested in the public’s lowcarbon consumption. It can be divided into two categories according to the process. The first is the purchase behavior, including the purchase of energy-saving household appliances and green products, investment in energy-saving houses, etc. The second is the post-purchase behavior, including actively managing energy consumption amount and efficiency of equipment and facilities purchased, as well as the reuse, reduced use, and recycling of items or resources. Low-carbon consumption is a relative concept and a gradual process. However, it should be noted that the extent of low-carbon consumption realized is associated with the factors such as the stage of economic and social development, social consumption culture, way of life and technology level. Low-carbon consumption varies from time to time and from place to place. Low-carbon standards should also be dynamically adjusted. The goal of low-carbon consumption is a high quality of life. On the basis of meeting the needs of residents for a better life, we should reduce high-carbon 4

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consumption and luxury consumption, and gradually move towards low-carbon consumption. We enjoy a higher level of consumption experience and better economic, social and environmental benefits through low-carbon consumption, thus ultimately achieving the dual goals of improving quality of life and cutting carbon emissions.

2.3 Influencing Factors of Low-Carbon Consumption Behavior Consumption shows the subjective utility of consumer demand. Compared to ordinary consumption, low-carbon consumption requires higher costs such as money, energy and time. Consumers will reasonably evaluate their reasons for supporting and opposing low-carbon consumption before taking action. Low- carbon consumption behavior is influenced not only by economic factors such as economic development level, residents’ income, product prices, and cost- effectiveness, but also by non-economic factors such as social environment, sense of individual responsibility, attitude to the environment, environmental problem cognition, and consumption policies. These factors become the internal or external drivers of consumption actors. Government fiscal and tax incentives as well as supervision and punishment measures give an external impetus to promoting low-carbon consumption. Psychological factors of consumers such as cognition of low carbon, attitude to lowcarbon consumption, and sense of low-carbon responsibility constitute the internal driving force for making low-carbon consumption. Therefore, in order to regulate consumer behavior, it is necessary to have external incentive and constraint mechanisms and also increase publicity and education on low-carbon consumption, so that consumers have an awareness of low-carbon consumption, which will increase consumers’ willingness to make low-carbon consumption.

3 Low-Carbon Consumption Practice—Foods, Clothings, Housings, Transportation and Other Daily Necessities Low-carbon consumption activities center on the general public’s needs for food, clothing, housing, transportation and other daily necessities, covering families, businesses, schools, office buildings, enterprises and public institutions, etc.

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3.1 Low-Carbon Foods and Clothings Clothing or food, closely related to people’s lives, causes carbon emissions during its production, processing, storage, transportation, consumption and disposal. Advocating low-carbon clothing and diets should start with changing the consumption behavior of the general public. Feasible ways to reduce the total consumption of clothing include choosing clothing made of recycled materials, using natural fabrics such as cotton and linen instead of polyester fabrics with higher carbon emissions, recycling and reusing old clothes, improving clothing utilization, and saving water and electricity during laundry. Some garment manufacturers use “carbon labels” to promote low- carbon garment production processes and guide consumers to learn about the environmental protection functions of low-carbon clothing. According to the Special Report on Climate Change and Land released by the UN Intergovernmental Panel on Climate Change (IPCC) in 2019, due to factors such as the extensive application of nitrogen fertilizers in agriculture as well as the consumption of water resources, the food systems contributed 21–37% of global greenhouse gas emissions; global greenhouse gas emissions from grain losses and waste accounted for 8–10% of the total global anthropogenic greenhouse gas emissions, resulting in economic losses of about US$1 trillion per year.5 Therefore, it is highly necessary to advocate low-carbon diets on the demand side, develop lowcarbon catering, and shorten the food supply chain, such as using energy-saving and low-carbon cooking devices, saying no to disposable tableware, making moderate consumption of food, and promoting paperless recipes. Reducing food waste is also another key means to avoid pollution and cut carbon emissions. In addition to moderate consumption, food can be preserved through freezing, drying or pickling, and kitchen waste can be composted for recycling. Moreover, meat and dairy products emit more greenhouse gases due to their growth or feeding needs compared to vegetables and fruit. As a result, a balanced diet and vegetarian consumption also become a new trend of healthy life. In London, more than 100 common green planting areas have been opened up and rented to residents for cultivating vegetables, melons and fruits, thus being called “community parks”. Local citizens are encouraged to participate in this program by means of financial support, volunteer training, etc. by local governments. Through community parks, residents become self-sufficient in fruit and vegetables, and also raise environmental awareness, and make better dietary choices and shopping habits through the planting campaign.

3.2 Low-Carbon Buildings Low-carbon buildings involve controlling energy consumption and carbon emissions in daily heating, heat dissipation, lighting, etc. for residential buildings, as well as offices, schools, shopping malls and other public buildings. Relevant concepts 5

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also include low-energy buildings, near-zero energy buildings, zero energy buildings, energy plus houses, etc. Moreover, different parts of buildings are covered with greenery to expand the green area, realize carbon sequestration in buildings, and improve the living environment. Germany achieves energy saving and emission reduction in buildings through adopting ultra-low energy passive building construction technology and increasing the use of renewable energy. Instead of using heating equipment, passive houses rely on thermal insulation structure, solar energy use, fresh air devices with waste heat recovery and other technologies to maintain appropriate indoor temperature. Despite 5–8% higher than ordinary buildings in terms of the cost, passive houses basically have the same economic benefits in view of the energy saving effect, and can also obtain better environmental benefits and living experience. To encourage the use of passive technology, the German KFW Bank provides low-interest loans for the purchase of passive houses, and several federal states also provide special regional financial support. Energy plus houses are the ultimate goal of energy-saving building development. Solar photovoltaic power is used to the greatest extent to create a single building as a power source that can be connected to the grid for use while generating electricity for its own use. In 2012, Chongqing city, China, issued the Evaluation Standard of Low-carbon Buildings, the first one on low-carbon buildings in China. The standard covers the building lifecycle of planning, design, construction, operation, demolition and recycling. The carbon emission performance of buildings is optimized by reducing carbon sources and increasing carbon sinks. The Technical Standard for Nearly Zero Energy Buildings issued by China in 2019 stipulates the standards for “ultra-low energy building”, “nearly zero energy building” and “zero energy building”, with standards for energy efficiency of buildings gradually improving. While improving building forms and residents’ quality of life, it brings new investment opportunities.

3.3 Low-Carbon Transportation The common means of low-carbon transportation in various countries can be divided into two categories. One is the reform of transportation structure and the ways for getting around, including developing multimodal transportation such as railway and waterway transportation, using public transportation instead of private cars, using slow-moving traffic modes such as bicycles and walking instead of motor vehicles, and reducing high-carbon travel such as by air.6 Singapore strictly controls the total number of private cars through the car ownership certificate, electronic road toll system and other measures. Purchasers of new cars must obtain the car ownership certificate in the form of competitive bidding before having the vehicle registered. The car ownership certificate is valid for 10 years. The number of quotas is determined by the government according to the total number of vehicles, the number of end-of- life vehicles, annual fixed increase, etc. The entrances of all roads leading 6

Wang Jingtian and Ma Xiaoming (2021).

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to the city are equipped with gates. Vehicles entering the city center are charged fees at different times to increase the cost of car use, ensure the smooth flow of traffic, and reduce vehicle exhaust emissions. The other is the low- carbon transition of transportation equipment and supporting infrastructure, including replacing traditional gasoline with natural gas, biofuels, hydrogen fuels and other clean energy, promoting new energy vehicles, trolleybuses and other electric transportation, as well as using IT-based intelligent logistics and transportation systems to improve transportation efficiency and reduce traffic energy consumption. The Tokyo Metropolitan Government of Japan vigorously promotes the application of pure electric vehicles, fuel cell vehicles and biomass energy in terms of the innovation of automobile power, and uses biodiesel for urban buses. In terms of mobility, a dense public transportation network is built to link major cities, with over 80% of residents choosing rail transit for commuting. An ecological driving management system is implemented to guide drivers to develop good driving habits without making sudden acceleration and deceleration, driving at top speed, or idling engine for a long time so as to improve fuel efficiency.

3.4 Energy-Saving Household Appliances and Equipment Energy-saving household appliances include energy-saving air conditioners, fridges, lighting fixtures, etc., as well as wood, bamboo, and grass furniture, etc. When buying energy-saving household appliances, consumers will consider their basic performance, cost-effectiveness, low-carbon performance, ease of use and design, etc., so that energy-saving products replace energy-intensive products. In order to incentivize consumers to choose energy-saving household appliances, the government usually gives energy saving subsidies to reduce the costs of energy-saving products. From 2009 to 2011, Japan implemented an “ecological points” return system for green household appliances, which gives ecological points to consumers who purchase designated energy-saving household appliances. Subsidy standards for different types of products and energy efficiency levels are different. Consumers can exchange points for products or services. The energy efficiency certification and labeling system is another key means to regulate the standards for the production of energy- saving and low-carbon products and to guide consumers to select energy- saving and low-carbon products. In 1992, the U.S. Department of Energy and Environmental Protection Agency jointly launched a program called “Energy Star”, which promotes energy conservation for consumer electronic products. After product samples submitted by manufacturers are tested and passed by certification bodies recognized by the Environmental Protection Agency, manufacturers can use the Energy Star logo on approved products. This practice was later extended to lowcarbon building certification and adopted by seven countries and regions such as Canada and Japan. The federal government provides US$300 million to encourage consumers to purchase “Energy Star” products to replace old household appliances. Each state government determines its own catalog of products, subsidy standards

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and implementation plans in light of the demand for household appliances and the population in each state. As one of the world’s largest producers and consumers of household appliances, China has officially implemented the energy efficiency labeling management system since 2004, which applies to widely used energy-using products with great energy-saving potential, with the system being named “China Energy Label” and divided into five levels. In the context of stimulating consumption and ensuring steady economic growth in recent years, the central government has encouraged local governments to implement special subsidies for energy-saving household appliances in light of local conditions. Since February 2019, Beijing has implemented a three-year subsidy policy for energy-saving household appliances, giving corresponding financial subsidies to consumers of household appliances labeled with “level 1 energy efficiency” and “level 2 energy efficiency”. This drives the optimization and upgrading of products while promoting energy conservation, emission reduction and consumption. Enterprises including Suning, JD.com, and Gome have launched “trade-in” consumption subsidies for energy-saving household appliances.

3.5 Low-Carbon Communities Residential communities bring together elements such as transportation, construction, and open space in urban public areas. Therefore, low-carbon transition projects based on communities are highly valued globally. Low-carbon communities require the construction of low-carbon energy infrastructure, low-carbon housing, lowcarbon transportation system, waste recycling and utilization system, etc. The compact and high-density layout is usually adopted in terms of spatial form. The community serves a variety of functions as a result of the mixed use of land. Communities equipped with complete supporting services offer a reasonable service radius to encourage residents to choose walking and public transportation for mobility, thus reducing carbon emissions. Known as the “world’s first zero-carbon community”, Beddington Zero Carbon Community in Britain was refurbished at the beginning by using large quantities of waste building materials in 2000, which saved construction costs and energy consumption. High-density buildings and thermal insulating walls reduce the heat dissipation of buildings. Each house is equipped with a glass greenhouse to maximize the use of solar energy. It also has a cogeneration system based on waste such as wood. Offices and residential buildings are mixed in the community. Multi-functional public spaces such as sports venues and horticultural plots are designed to shorten the mobility distance of residents while meeting diverse daily needs. Since 2014, China has initiated the pilot construction of low-carbon communities to promote low-carbon community management in terms of community planning, energy-saving renovation of public areas, infrastructure renovation, diffusion of low-carbon culture, and compilation of the list of community greenhouse gases. Excellent experiences in pilot construction have been gained by Xiaolan Town in Zhongshan City, Guangdong Province, Low-carbon Community in Changxindian in

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Beijing, etc. It is necessary to make further exploration such as evaluating community carbon emission reduction effects and policy support.

4 China Is Acting to Cultivate a Low-carbonConsumption Model Since the 11th Five-Year Plan period, China has been promoting energy conservation and emission reduction, starting with supporting low-carbon products such as energysaving household appliances and new energy vehicles and focusing on key areas such as low-carbon buildings and smart low-carbon transportation to change the way of life of the public. The concept of green and low-carbon consumption has gradually gained popular support.

4.1 China’s Policies on Low-Carbon Consumption Back in 1994, the Chinese government issued China’s Agenda 21, which proposed establishing a sustainable consumption model as a key component of the vision of sustainable development. The 11th Five-Year Plan period inaugurated low-carbon consumption driven by energy conservation and emission reduction. During this period, China proposed building a resource-conserving, environment-friendly society to promote energy conservation and emission reduction, and set the targets of energy intensity control. Saving energy consumption in buildings, transportation, etc. were also important areas. The 11th Five-Year Plan states that: “We will raise the awareness of conservation, encourage the production and use of energy- and water-saving products, and energy-saving and environmentally friendly vehicles, develop energy- and land-saving buildings, and establish a model of healthy, culturally advanced and resource-saving consumption.”7 The Decision of the State Council on Implementing Scientific Outlook on Development and Strengthening Environmental Protection in 2005 pointed out, “In terms of consumption, we shall advocate environmentally friendly consumption model, and implement environmental labeling, environmental certification and green government procurement systems.” During the 12th Five-Year Plan period, low-carbon consumption is no longer limited to government policy guidance. Instead, it focuses on the overall requirements of adopting a green way of life. The 12th Five-Year Plan states that we would advocate the concept of culturally advanced, economical, green and low-carbon consumption, and promote the adoption of a green way of life and consumption model in line

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“Proposal of the CPC Central Committee on Formulating the Eleventh Five-Year Plan”, Central People’s Government of the People’s Republic of China, October 19, 2005.

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with China’s national conditions. In 2015, the Report on the Work of the Government emphasized “promoting green consumption” in the part regarding “moving faster to foster growth areas of consumption”. Documents such as the Implementation Opinions of the Ministry of Environmental Protection on Accelerating the Adoption of A Green Way of Life (Huanfa [2015] No. 135), the Guiding Opinions on Promoting Green Consumption (FGHZ [2016] No. 353), and the Overall Action Plan for Pursuing A Green Life (FGHZ [2019] No. 1696) have been issued. According to the Enhanced Actions on Climate Change: China’s Intended Nationally Determined Contributions issued by the Chinese government in 2015, promoting low-carbon consumption among the general public will be one of the means to tackle climate change. Since the 13th Five-Year Plan, the system of green and low-carbon consumption was further improved, and a modernized economy featuring green, low-carbon and circular development was built. The report of the 19th CPC National Congress pointed out: “We will promote green development, move faster to establish a legal and policy framework that promotes green production and consumption, and establish and improve an economic system of green, low-carbon and circular development.”8 The Code of the Ecological and Environmental Conduct for the Citizens (on trial) issued by the Ministry of Ecology and Environment in 2018 advocates that citizens practice a simple, moderate, green and low-carbon way of life, fulfill responsibilities on the ecological environment, and promote ecological conservation as well as contribute to the building of a beautiful China. The Fourth Plenary Session of the 19th CPC Central Committee raised the promotion of green consumption to the institutional level and stressed the need to establish a legal and policy framework that promotes green production and consumption. In March 2020, the National Development and Reform Commission, the Ministry of Justice and other government departments jointly issued the Opinions on Moving Faster to Establish a Legal and Policy Framework that Promotes Green Production and Consumption, guiding the establishment of national and local systems for green consumption. In terms of policies for promoting low-carbon consumption, China has issued many laws and regulations such as the Renewable Energy Law, the Law on Promoting Circular Economy, the Policy on Projects to Promote Energy- efficient Products for the Benefit of the People, the Circular on Restricting the Production, Sales and Use of Plastic Shopping Bags, and the Interim Measures for the Administration of Fiscal Subsidies for the Promotion of Efficient Lighting Products, and implemented the “Policy on New Energy Vehicle Subsidy”, “Policy on Denitrification-based Electricity Price Subsidy”, “Government Procurement Mechanism for Energy Saving and Environmental Label Products”, and “Scope of Vehicles that Enjoy Subsidy for Scrapping and Updating Old Vehicles as Well as Subsidy Standard”. A policy system for low- carbon consumption has taken shape. Many local governments experimented with carbon points to promote individual low-carbon consumption. For example, Wuhan launched the “Carbon Treasure Package” program; Beijing 8

“Xi Jinping Said that China will Speed up Reform of the System for Developing an Ecological Civilization, and Build a Beautiful China”, Xinhuanet, October 18, 2017.

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launched the “Green Mobility and Carbon Inclusion” program; Guangdong Province and Chengdu City linked the carbon market with the carbon points system to form a carbon inclusive system, so as to promote the sustainable development of the carbon points system. According to the Working Guidance for Carbon Dioxide Peaking and Carbon Neutrality in Full and Faithful Implementation of the New Development Philosophy issued by the CPC Central Committee and the State Council, we will promote greener economic and social development in all respects, promote faster development of green ways of working and living, increase the supply and consumption of green and low-carbon products, and advocate a green and low-carbon way of life. During the 14th Five-Year Plan period, digital technology led to more green, low-carbon, convenient and efficient consumption models, creating opportunities to stimulate economic vitality and improve the residents’ living standards. In addition to mandatory constraints, we should promote publicity and education to build a consensus in society, and make a green and low-carbon way of life a fashion.

4.2 The Effectiveness of China’s Policy on Low-carbon Consumption 4.2.1

Overall Situation of China’s Low-Carbon Consumption

Consumers have a growing demand for low-carbon consumption products and services. According to the Report on Green Consumption Trend Development 2019 released by Jingdong Big Data Research Institute, there are more than 100 million types of products for “green consumption” on JD.com, with the sales volume growing faster than that of JD.com as a whole by 18%. According to the Survey Report on Citizens’ Ecological Environmental Conduct (2020) released by the Policy Research Center for Environment and Economy under the Ministry of Ecology and Environment, more than 90% of respondents in China take a positive attitude towards green consumption, but less than 60% of respondents are satisfied with their green consumption. Respondents performed well in terms of restricting the use of disposables, but performed poorly in terms of purchasing green food as well as green products with low contamination in the production process. Most respondents cited the inability to identify green products, the lack of assurance for product quality, and high prices as the main obstacles to green consumption.9 On the whole, China’s consumers have a growing awareness of low- carbon consumption, but the awareness has not been translated into action. The Research Report on Low-Carbon Family Life and Low-Carbon Consumption Behavior jointly released in 2020 by the Energy Foundation and Southern Weekend comprehensively analyzed the low-carbon consumption patterns and low-carbon way of life of Chinese households. The report is the result of a quantitative survey on the life of a total of 9

Guo Hongyan and Jia Ru (2021).

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3500 respondents in cities at or above the prefecture level in China. According to the survey, the respondents’ familiarity with and recognition of the “low carbon” concept is very high in terms of “low-carbon consumption cognition”, and most of them recognize the significance of low-carbon life. 31% of respondents want to learn how to better identify low-carbon products; 28% want to know how the carbon footprint of products is calculated; 24% want to know whether a low-carbon life will increase the cost of living. In terms of “awareness of low-carbon responsibility”, respondents tend to influence those around them through actions rather than preaching. There is still much scope for improvement in terms of personal influence on a low-carbon life. In terms of “low- carbon consumption action”, the general public is highly willing to adopt low-carbon energy-saving behavior. The most readily accepted low-carbon consumption takes place in the field of household appliances. Respondents are most willing to use low-carbon household appliances and purchase products with high energy efficiency levels. Therefore, the types and scope of low- carbon products remain to be improved.10

4.2.2

Specific Areas of Low-Carbon Consumption in China

Increasingly diverse measures are issued for promoting low-carbon products. In 2009, the policy on subsidy for energy-saving products for the benefit of the people was first implemented in the field of household appliances. According to the Implementation Plan of Optimizing Supply for Steady Growth of Consumption and a Strong Domestic Market (2019) jointly issued by the National Development and Reform Commission, the Ministry of Industry and Information Technology and other departments, appropriate compensation should be given to consumers purchasing green and intelligent household appliances that save energy and emit less carbon dioxide, which stimulates the consumption of energy-saving and environmentally friendly household appliances. The low-carbon product certification system is improving. The outline of the 11th Five-Year Plan states that “the mandatory energy efficiency label system and the energy-saving product certification system will be implemented”. The Circular of the General Office of the State Council on Implementing the Nation of Energy Savers Initiative issued in 2008 proposed encouraging and guiding consumers to purchase and use products with energy efficiency labels at level two or above or with energysaving product certification marks. The Ministry of Ecology and Environment formulated the List of Environmental Label Products for Government Procurement, which issued nine pieces of standards on environmental label products, and launched the low-carbon product certification program. The category of products that significantly emit greenhouse gases such as automobiles, household appliances and office supplies is selected as the priority area for low-carbon product certification.11 In 2012, the

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Ding Yaoyao (2020). “China Lists Automobiles, Household Appliances, etc. as Priority Areas for Low-carbon Product Certification”, Xinhua News Agency, May 1, 2010.

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National Development and Reform Commission and the Certification and Accreditation Administration of China jointly formulated the Measures for the Administration of Low-Carbon Product Certification (Interim), and implemented unified national catalogs of low-carbon products, unified national standards, certification technical norms and certification rules, as well as unified certification certificates and marks. Positive progress has been made in the establishment of a green and low- carbon transportation system. Greater efforts have been made in new energy and clean energy substitution. In China, the railway electrification rate reached 71.9%, and there are over 400000 buses and over 430000 trucks that run on new energy. The proportion of vehicles running on new energy and clean energy gradually increases. Since 2010, China has seen rapid development in new energy vehicles, with its sales volume accounting for 55% of the world’s total. The ownership of new energy vehicles in China account for half of the world’s total.12 Demonstration projects for green transportation provinces (cities), green highways, and green ports have been carried out, with annual energy savings of over 630000 tons of standard coal. The “oil to electricity” program has been completed at the container terminals of major ports along the coast and rivers. The three-year campaign to improve transportation structure has kicked off. The national pollutant emissions from motor vehicles decreased by 65.2% from 2012 to 2019. The “road to railway” and “road to waterway” transportation has been further promoted for commodities. The proportion of railway freight volume and waterway freight volume in the total freight volume in China increased from 7.8% and 14.14% in 2017 to 9.5% and 16.17% in 2019, respectively. The central car purchase tax funds are used to support the construction of comprehensive passenger transportation hubs, freight hubs, and railways for the evacuation of cargoes from ports. The development of multimodal transportation such as roadrailway intermodal transportation and sea-railway intermodal transportation is coordinated. The central government adopts the method of “substituting subsidies with rewards” to support the retirement of commercial diesel trucks with emission standards of national III and below in Beijing-Tianjin-Hebei region and surrounding areas, as well as Fen-Wei plains.13 In terms of residents’ travel modes, the Beijing Municipal Commission of Transportation and the Municipal Ecology and Environment Bureau, in conjunction with AutoNavi Map and Baidu Map in September 2020, implemented green travel and carbon inclusive incentive measures. Users can receive corresponding carbon credits—which can be exchanged for rewards—after a trip if they make path planning and navigation for low-carbon transportation modes such as buses, metro, bicycles, and walking. Energy-and land-saving buildings transition to green buildings. Led by the Ministry of Housing and Urban-Rural Development of China, a slew of measures for green building evaluation and identification, construction of demonstration projects for green buildings, etc. have been implemented. The Evaluation Standard for Green

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Dong Zhanfeng (2021). The White Paper Sustainable Development of Transportation in China, website of the State Council Information Office of the People’s Republic of China, December 22, 2020.

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Industrial Building, Evaluation Standard for Green Office Building, Technical Guidelines for Passive Ultra-low Energy Consumption Green Building (Trial) (Residential Buildings), and Technical Code for Operation and Maintenance of Green Building have been formulated. “Promoting energy conservation for buildings as well as green building development” officially became the main task during the 13th Five-Year Plan period. Economically developed areas such as Beijing, Shanghai, Guangzhou, and Hangzhou have built many demonstration buildings, demonstration energy- saving communities and ecological communities in light of local characteristics. According to China’s Energy Conservation and New Energy Vehicle Industry Development Plan (2012–2020) issued in 2012, pure electric vehicles are the main strategic orientation for the transition of China’s automobile industry, and the new energy vehicles bought by urban residents in China are primarily pure electric vehicles. The obstacles to the promotion of electric vehicles include high prices, short driving range, long charging time, inadequate charging facilities, the safety of power batteries, etc. The promotion is also affected by a lack of coordination among relevant government departments. Enterprises play an increasingly significant role in providing low-carbon products and services and promoting low-carbon consumption among the general public. For example, JD.com cooperates with upstream and downstream enterprises in implementing reduced and circular logistics packaging. Meituan provides a “no disposable tableware” option for its takeaway business. “Ant Forest” players obtain forest energy converted from carbon emission reductions after completing low-carbon consumption such as green travel and online shopping through Alipay. Trees will be planted based on forest energy, thus encouraging users to participate in low-carbon activities.

4.3 China’s Dilemma in Promoting Low-Carbon Consumption The effective supply of low-carbon products is insufficient, and the trading market for low-carbon products is imperfect. Problems such as few low-carbon products and high prices in the market impede low-carbon consumption. The high cost of the lowcarbon product makes its price not competitive, leading to the phenomenon of “Best Game No One Played”. The market demand remains to be tapped, and policy support is required for the green and low-carbon industry. A complete low-carbon business model is still lacking. The issue of exaggerated performance of low-carbon products is prominent, and shoddy goods are sold as quality goods, and fake imitations are paraded as genuine articles. All these dent consumers’ purchase confidence. The low-carbon guidance policy feature single administrative constraints. There are mainly administrative constraints and punitive measures for low- carbon consumption, while the comprehensive use of fiscal, monetary, price, income distribution, consumption guidance and other policy tools is inadequate. Productive consumption is primarily governed by regulatory policies, but the low-carbon consumption as a whole, including consumption for living, is insufficiently covered.

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There is no detailed roadmap for the promotion of low- carbon consumption. In the future, we should focus on and serve the “Carbon Peaking and Carbon Neutrality” goals, and specify the key areas, implementation paths and phased tasks for low-carbon consumption. The intensity and coverage of low-carbon publicity are insufficient. China has adopted a slew of measures for low-carbon publicity and guidance, such as lowcarbon consumption day and low-carbon community construction, but a high level of recognition exists only among young and middle-aged people. Knowledge about low-carbon consumption and low-carbon life is not popularized. For example, greater efforts should be made to diffuse professional knowledge about carbon footprint, carbon credit, carbon trading, and the cost- effectiveness of low-carbon products. Moreover, there is a lack of supporting measures for intellectual property protection, market regulation, etc., so that market entities are not effectively motivated and guided.

5 Multiple Strategies to Spur Low-Carbon Consumption Low-carbon consumption is the result of multiple psychological factor motivations. Even if consumers have the willingness to make low-carbon consumption, they may be distracted by various factors when it comes to purchase and use. Therefore, to achieve low-carbon consumption, the whole society must act in concert. Consumer behavior must be regulated with rules and regulations, and low-carbon culture education must also play a guiding and demonstration role, jointly creating a low-carbon consumption culture in society.

5.1 Policy Guidance for Low-Carbon Consumption Consumers making low-carbon consumption will directly or indirectly promote the reduction of total carbon emissions, bring additional environmental benefits to other members of a society free of charge. This is the positive externality. It is necessary to give positive incentive compensation to low-carbon consumers. Similarly, high energy consumption with high emissions causes damage to the ecological environment, and should be punished to increase the cost of consumption. The ways to guide people to make decisions on low-carbon consumption broadly fall into three categories.14 First, eliminate cognitive bias through policy guidance, giving an impetus to lowcarbon consumption. The willingness of individuals to make low-carbon consumption may not be translated into real action. For example, prices of low- carbon products, the ease of purchase and use, and other factors will cause consumers to 14

Guo Hongyan and Jia Ru (2021).

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have a cognitive bias against the initial willingness to low-carbon consumption. We can improve the quality of low-carbon products, increase related supporting services, provide fiscal and tax subsidy incentives, etc. to guide consumers to regulate their behavior, establish a diversified and long- term value, and make low-carbon consumption on their own initiative. For example, the clearer and more simplified the information about energy-saving products, the more willing the consumers to make consumption. Second, build a social culture for low-carbon consumption and promote lowcarbon consumption behavior. The trend of low-carbon consumption can be promoted through publicity and education. For example, the government can standardize the certification standard system for low-carbon products, leverage the demonstration effect of green government procurement, and promote consumers to change their consumption ideas. Regarding residents, residents can be guided to buy low-carbon products, choose low-carbon travel, and spread low-carbon concepts through such means as carbon credit points and low-carbon culture. We can leverage the demonstration effect of mutual assistance among relatives and friends, so that individual behavior of low- carbon consumption is reinforced in the process of social interaction, creating a low-carbon culture in society. Third, improve the supporting conditions to make low-carbon consumption an economical and convenient choice. The low-carbon product certification and labeling system should be improved to help consumers identify low- carbon products they need and learn about the environmental impact of low- carbon product consumption. At the same time, we should improve supporting conditions such as low-carbon technology and low-carbon infrastructure, promote low-carbon transportation and low-carbon buildings, increase low- carbon public services, etc., so that low-carbon products and services are feasible in practice and affordable in price. From the perspective of content and role, policies that guide low-carbon consumption can be divided into several categories: incentive policies: low- carbon consumption support policies are adopted, such as fiscal subsidies for consumers who buy low-carbon products, tax relief for enterprises producing low-carbon products; establishment of low-carbon technology R&D funds. Punitive policies: carbon emission taxes are imposed on enterprises or individuals with large carbon emissions. More taxes are paid for more emissions. Differentiated energy taxes are implemented. Support policies: rules for an orderly low-carbon consumption market are established, such as formulating unified classification standards for low-carbon products, implementing an access system for low-carbon consumption goods, and designing corresponding exit mechanisms for products that do not meet low- carbon standards. We should establish a leadership, organization and publicity work mechanism to guide low-carbon consumption. The public sector such as the government should play a demonstration role. We should hold theme publicity activities and use television stations, newspapers and relevant media to publicize low carbon, with a view to forming social consensus on low-carbon consumption.

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5.2 Focus of Policies for Promoting Low-carbon Consumption Low-carbon consumption leads to carbon reduction at the source from the demand side. It constitutes a key part of China’s economic system of green, low-carbon and circular development. In the context of China tapping domestic demand potential and promoting a domestic cycle, innovation in low-carbon products and services will create business opportunities. To help the general public actually make lowcarbon consumption, it is necessary to resort to the means such as policy guidance and market cultivation. We should cultivate a low-carbon consumption market and improve market trading rules. We should actively promote energy conservation and emission reduction, as well as trading in carbon permits. In terms of pricing, we should promote the reform of resource and energy prices, so that final consumer goods truly reflect the environment and resource costs, and excessive consumption can be curbed. In terms of the distribution of benefits, a product incentive mechanism and a product cost sharing mechanism should be established. The management system of low-carbon consumption will be improved. We will establish and improve the market regulation, technical system, testing standards, information sharing mechanism, etc. for low-carbon consumption, bring order to production, operation and consumption for low-carbon consumption, and strengthen the guarantee and supervision mechanism for low-carbon consumption. We will explore and improve the system of certification management, publicity, incentive mechanism, etc., formulate policies to encourage low-carbon consumption, regulate the low-carbon consumption market, meter out greater punishments for the abuse of certification marks, and make green marks more authoritative, so that green and lowcarbon products are recognized and trusted by more people. The “whole lifecycle” management model is included in the low-carbon product certification system, so that the low-carbon principle applies to the whole process of raw material collection, product production, use, and waste recycling. We will use green finance service means such as credit for low-carbon consumption and trading in carbon sinks. We will establish sound fiscal and tax policies to support low-carbon development, operate low-carbon credit businesses, increase the proportion of consumption tax in the tax system, and give appropriate subsidies and tax relief for low-carbon and energy-saving products, so as to stimulate public enthusiasm for low-carbon consumption to the greatest extent. We will promote the role of enterprises in the supply of low-carbon products as well as low-carbon consumption services. In addition to improving production processes, making technological innovations, and increasing low- carbon consumption products and services, enterprises can also use technology and platforms to help and motivate users to make decisions on more sustainable consumption. For example, a low-carbon product information traceability system can be established, so that the information on carbon labeling or carbon footprint of products can be displayed in

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the form of QR code, etc., thus resolving the issue of asymmetric consumption information of low-carbon products. We can build internet-based green and low-carbon life scenarios, and broaden the forms and channels of low-carbon consumption. We can draw on the experience of “Ant Forest” and “carbon credit points” to build digital platforms, innovate incentive models for low-carbon consumption, and guide the general public’s low-carbon behavior. At the same time, we can leverage the role of social organizations in publicity, organization and supervision, supervise the information compliance of enterprises in terms of green product certification, etc., protect consumers’ right to know the information on green and low-carbon products, and conduct investigations to gauge the carbon reduction effect of low-carbon consumption, build a social carbon points system, and so on. We will create low-carbon community consumption scenarios. A community atmosphere of low carbon and environmental protection is created, so that residents with environmental awareness can influence those around them. Social norms can be used to promote low-carbon behavior. A joint force to promote individual lowcarbon consumption can be created through cooperation with enterprises, schools, social organizations and other parties.

5.3 Leading Officials Play an Exemplary Role in Low-carbon Consumption The government is not only the decision-maker and supervisor of low- carbon consumption, but also plays a leading and demonstration role. In addition to formulating and implementing a full variety of low-carbon consumption policies, leading officials at all levels should set an example by fulfilling the concept of green and low-carbon consumption. We comprehensively promote green offices and observe energy use standards. We establish a sound management system for water and electricity quotas, and formulate and implement standards for the quota use of energy and for energy consumption expenditures. Green building standards are implemented for public buildings. Energy-saving products such as high- efficiency lighting products and new energy vehicles are prompted. Indoor air conditioning should be set at appropriate temperatures. Office equipment and assets should be used more efficiently, and the energy consumption of electrical equipment should be cut down. The energy-saving performance of government organs will be included in the year-end evaluation indicators. Individuals should be guided to develop low-carbon habits such as turning off unused lights and saving paper. Sound rules are laid down for the government’s green and low-carbon procurement. Procurement of products and services that meet green and low- carbon certification standards should be compulsory or a priority, and product recycling is promoted. Leading cadres take the initiative to choose low-carbon means of transportation. For example, the Administrative Affairs Bureau of Hubei Province purchases “official

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bicycles”, so as to promote “public servants use bicycle for business trips”. The proportion of new energy vehicles in official vehicles is also increased. We operate a thrifty government and say no to waste. It is forbidden to provide vehicles and hold receptions above the stipulated standards, make high- cost entertainment, etc. The standards for official activities are laid down, and waste is prohibited. Healthy and balanced meals are provided at canteens of government agencies, state-owned enterprises and public institutions. Self- service ordering and charging are provided in places where conditions permit, so as to reduce kitchen waste.

References Jia Feng, Technical Report on Research on Countermeasures and Approaches for China’s Consumption Pattern Transformation and Low-Carbon Society, Center for Environmental Education and Communications of Ministry of Ecology and Environment, July 2020. Zhuang Guiyang, “Understanding of Concept of Low-Carbon Consumption and Its Policy Framework”, People’s Forum and Academic Frontiers, No. 2, 2019. Guo Hongyan and Jia Ru, “How to Promote Low-Carbon Consumption under the Carbon Neutrality Goal”, China Sustainability Tribune, No. 5, 2021. Wang Jingtian and Ma Xiaoming, “Progress of Research on Low-Carbon Transportation and its Inspiration”, Ecological Economy, No. 5, 2021. Liu Wenlong and Ji Rongrong, “The Impact of Low-Carbon Awareness and Low-Carbon Way of Living on Willingness for Low-Carbon Consumption”, Ecological Economy, No. 8, 2019. Li Xiangqian, Wang Zhengzao, and Mao Xianqiang, “Quantitative Analysis of Influencing Factors of Urban Residents’ Low-Carbon Consumption Behavior: Case Study of Beijing”, Ecological Economy, No. 12, 2019. Ding Yaoyao, “Research Report on Low-Carbon Household and Low-Carbon Consumption Behavior Released, How Far Away Are We from Low-Carbon Life?” Environmental Economics, No. 5, 2020. Xu Yinlong, Zhao Yuncheng, Zhai Panmao, “Advances in scientific understanding on climate change and food security from IPCC special report SRCCL”, Advances in Climate Change Research, No. 1, 2020. Dong Zhanfeng, “Achievements of China’s Green, Low-carbon Development Abundantly Shows its Responsibility as a Major Power”. GMW.cn, June 8, 2021.

Chapter 8

Comprehensive Economic and Social Response in the Context of Carbon Peaking and Carbon Neutrality Zhou Hongchun, Zhou Chun, and Li Changzheng

To achieve the “dual carbon” goals, China must strive to make systemic changes in the economy and society in light of reality. We should, centering around the green and low-carbon goals, develop new and renewable energy industries, as well as energy storage and carbon recycling technologies and industries. For high energy consumption and heavy pollution, we should make obsolete backward technologies, processes and products. Improvement of energy efficiency should be prioritized. We should continuously improve policies and measures on energy conservation and emission reduction, afforestation, renewable energy development and utilization, etc. Legal, administrative and economic means should be used to establish a low-carbon society and effectively address the adverse impact of climate change on China’s economic and social development.

Z. Hongchun (B) Development Research Center, The State Council, Beijing, China e-mail: [email protected] Z. Chun Clean Heating Industry Committee of China Building Energy Efficiency Association, Beijing, China e-mail: [email protected] L. Changzheng Guofa Green Energy Conservation and Environmental Protection Technology Research Institute, Beijing, China e-mail: [email protected] © China Financial & Economic Publishing House 2023 G. Zhuang and H. Zhou (eds.), China’s Road to Carbon Peaking and Carbon Neutrality, https://doi.org/10.1007/978-981-99-3122-4_8

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1 Study and Formulate Plan, and Put Forward a Roadmap for Carbon Peaking and Carbon Neutrality The 19th CPC National Congress set the goals and basic strategies of socialist modernization in the new era, which include ecological conservation and its system building. In the first stage from 2020 to 2035, we will basically realize modernization, make a fundamental improvement in the ecological environment, and promote highquality economic and social development, thus laying a technological and industrial foundation for achieving carbon neutrality by 2060. In the second stage from 2035 to 2050, China will become a great modern socialist country. By 2060, China will achieve the goal of net zero greenhouse gas emissions, with its international influence, competitiveness and leadership for low-carbon development being enhanced. The 14th Five-Year Plan period is the key period and window period for carbon peaking. The Outline of the 14th Five-Year Plan (2021–2025) for National Economic and Social Development of the People’s Republic of China and Long-Range Objectives Through the Year 2035 set obligatory targets for reducing the energy consumption intensity per unit of GDP by 13.5% and reducing the carbon dioxide emission intensity per unit of GDP by 18% during the 14th Five-Year Plan period.1 The shortterm and medium-term action plans are essential for achieving the long-term goals of carbon peaking and carbon neutrality. According to the overall national goals, the response to climate change should be regarded as an opportunity for low-carbon transition and sustainable development, as well as the starting point for formulating a long-term low-carbon development strategy. Based on the 14th Five-Year Plan to combat climate change, the Working Guidance for Carbon Dioxide Peaking and Carbon Neutrality in Full and Faithful Implementation of the New Development Philosophy, and Action Plan for Carbon Dioxide Peaking Before 2030, local governments should develop implementation plans in light of local conditions to ensure carbon peaking and carbon neutrality, so as to ensure carbon peaking in the next 5–10 years and promote the realization of the carbon neutrality vision. Guided by green and low carbon development, we should align national economic and social development goals with the global goal of controlling temperature rise, and ensure the harmonious coexistence between man and nature as well as sustainable development. A thorough investigation should be conducted to aid the development of action plans for carbon peaking and carbon neutrality. To promote the realization of the “dual carbon” goals, we must make breakthroughs in many fields. We should analyze energy consumption and carbon emissions, formulate and implement carbon peaking action plans for key industries such as thermal power, steel, and chemical engineering, as well as transportation, construction and other fields, and make clear the goals and roadmap for carbon peaking. We should build an energy system that is clean, low-carbon, safe and efficient, control the total amount of fossil energy, and work to use energy more efficiently. The industrial sector should adopt green 1

Outline of the 14th Five-Year Plan (2021-2025) for National Economic and Social Development of the People’s Republic of China and Long-Range Objectives Through the Year 2035, People’s Daily, March 13, 2021.

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manufacturing, make breakthroughs in green and low-carbon technologies, implement pollution and carbon reduction campaigns in key industries, and move faster to apply pollution and carbon reduction technologies. We should study the overall plan and development roadmap of the national carbon market, and improve the relevant rules through “learning by doing”. The construction sector should raise standards for energy conservation. The transportation sector should establish a green and low-carbon transportation system. Due to unbalanced development, as well as great differences in industrial distribution and natural resource endowments, local governments should study and determine the strategic priorities and implementation paths for pursuing green and low-carbon circular development in light of local conditions in the context of the carbon neutrality goal. The eastern coastal regions should strictly control fossil energy consumption and be the first to achieve carbon peaking. Areas rich in renewable energy resources in southwest China should be the first to establish 100% renewable energy demonstration areas. Energy-intensive heavy chemical industries, large data centers and other electricity-intensive infrastructure can be built first in northwest and southwest regions rich in renewable energy resources, so as to promote local consumption of renewable energy-based electricity. Special attention should be paid to the development of distributed renewable energy in rural areas in light of local conditions. China Certified Emission Reduction (CCER) should be included in the carbon emission trading market of the state or provinces (autonomous regions or municipalities) as an offset mechanism to aid the sustainable economic and social development in rural areas. In order to implement the major strategic decisions made by the CPC Central Committee and the State Council on carbon peaking and carbon neutrality, the State Council issued the Action Plan for Carbon Dioxide Peaking Before 2030 on October 26, 2021. Shanghai, Jiangsu, Guangdong, Qinghai, Hainan and other regions proposed during the local “two sessions” in 2021 that they would strive to be the first to achieve carbon peaking in the country. Shanghai also set a timetable for this. State Grid, China National Offshore Oil Corporation, Sinopec and other enterprises also began strategy research or plan preparation for carbon peaking and carbon neutrality. On the basis of detailed surveys, local governments should, in light of the targets for 2025, 2030 and 2060 set in the Working Guidance for Carbon Peaking and Carbon Neutrality in Full and Faithful Implementation of the New Development Philosophy, and Action Plan for Carbon Peaking Before 2030, set carbon reduction evaluation indicators, assign medium- and long-term tasks for pollution and carbon emissions reduction, and include the transformation of energy structure, the proportion of new energy sources, the proportion of carbon neutrality, phased assessment targets, etc. in the roadmap for carbon dioxide emission control before 2030, plan for carbon neutrality before 2060, and so on.2

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2 Improve the Economic Policy System in Response to Climate Change Climate change is both an environmental issue and a development issue. We must proceed from the perspective of the sustainable development of the Chinese nation and the community with a shared future for mankind, and comprehensively use economic, technological, legal and administrative means to promote the green, lowcarbon transition and high-quality development of China’s economy and society. We should continuously improve policies on industry, fiscal and tax, credit and investment, establish policy and institutional mechanisms that help deal with climate change, leverage fiscal means’ role of positive incentives and restrictions, cut the cost of carbon emission reduction for enterprises and individuals, and gradually phase out enterprises and products that do not meet carbon emission reduction standards.

2.1 Industrial Policy Industrial policy is a key policy for China’s economic development. Classified guidance is provided for industries that should be encouraged, restricted, phased out, etc. The industrial catalog should be released, as well as revised in light of changes in economic development. We should increase the industry that encourages green and low-carbon development, support the development of green, low-carbon and circular industries, control the production capacity of industries that should be restricted, and shut down outdated energy-intensive production facilities with high emissions. We should promote the implementation of resource support and heavy chemical engineering projects under the national distribution of major productive forces. We encourage the development of low-carbon industries as a lucrative emerging sector. High-carbon industry is hardly sustainable, because the reserves of non-renewable fossil energy resources are limited, and extensive carbon dioxide emissions will worsen the living environment of human beings. Developing low-carbon industries is a sure choice for sustainable development in all countries in the world. The transition from a high-carbon industry to a lowcarbon industry will take a long time, because the system of high-carbon industries is large and solid, and the dependence of traditional industries on fossil energy will not change in a short time. Since low-carbon industries must be premised on lowcarbon or carbon-free energy, the construction of relevant infrastructure requires huge investments, and also takes a long time. It is necessary to stipulate and enforce stricter market access standards according to the requirements of resources and energy saving as well as environmental protection, and the performance standards of resources and the environment in industries. We should establish a national climate investment and financing project pool, build a matching platform for low-carbon project fund demand and supply, and foster the combination between industry and finance in the

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low- carbon fields. We should promote the procurement and consumption of lowcarbon products, and cultivate the market and stimulate demand.3

2.2 Fiscal and Tax Policies Fiscal and tax policies are key economic policies, covering income distribution, tax policies, and investment. A scientific fiscal and tax system is fundamental for optimizing resource allocation, ensuring social fairness, and achieving enduring peace and stability of the country. We should adjust the tax standards for coal, crude oil and natural gas resources, as well as the consumption tax rate of passenger cars. Tax leverage should be used to curb unreasonable demand, increase the cost of using high-carbon resources, and promote resource saving and efficient use. Fiscal funds should be used to attract private funds to invest in the realization of the carbon neutrality goal. We should implement the policy of “promoting governance with rewards” such as energy-saving technological transformation, building heat supply metering and energy-saving renovations, as well as the capacity building for pollutant emission reduction. We should implement preferential policies for energy- saving, water-saving environmentally equipment, comprehensive utilization of resources, value-added tax relief, and adjust the tax policy that suppresses the export of energyintensive products with high emissions. The feasibility of imposing a carbon tax should be studied to raise awareness among enterprises, individuals and others of the importance and urgency of the global issue of climate change.

2.3 Price Policy Price is the core element of the market mechanism, and enterprises are the mainstay in the market allocation of resources. We should deepen the reform of the pricing mechanism for resource products, and put in place a mechanism for setting prices for resource products capable of reflecting supply and demand in the market, resource scarcity, and the cost of environmental damage. We implement tiered pricing for electricity consumption and punitive prices. We comprehensively implement the policy of desulfurization and denitrification- based electricity fee for coal-fired generating units, and encourage the R&D and application of carbon dioxide removal (CDR) technology. We establish a mechanism for regulating the prices of industrial land and residential land, increase the price of industrial land, reduce the transfer of wealth from middle- and low-income buyers to the rich due to rising housing prices, reflect the policy of “housing for living in”, and prevent the hidden danger of social instability caused by a large gap between rich and poor.

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2.4 Regional Policies Due to great differences in regional development in China, it is impossible to achieve the long-term goal of carbon neutrality overnight. Local governments should set timetables for carbon peaking and carbon neutrality in light of local conditions, and must not adopt “one-size-fits-all” practices, let alone campaign-style “carbon reduction”. While reducing high-carbon energy consumption, local governments must issue supporting social policies to prevent relevant populations from difficulties. We must not introduce radical and unrealistic measures for carbon emission reduction for the purpose of early realization of “dual carbon” goals. We should not compete and rush to reduce carbon emissions regardless of reality. A significant reduction in the output and consumption of fossil fuels such as coal, oil and gas may lead to energy shortage caused by overly ambitious energy transition and insufficient investment in fossil energy, resulting in an adverse impact on economic and social development. Similar lessons can be learned at home and abroad. For example, a key reason for the rolling blackout in California in the U.S. in the summer of 2020 is that it lacked a reasonable energy structure while significantly increasing the proportion of new energy-based power generation and promoting energy transition. As a result, there was inadequate electric power resource. Domestically, in order to complete the “double control” goal for energy and the “coal reduction” task, Yiwu, Wenzhou and other cities in Zhejiang Province introduced measures4 to restrict the use of electricity in government agencies, public places, and some enterprises in 2020. This runs counter to the requirements of “balancing the relationship between pollution and carbon emissions reduction with the normal life of the general public” put forward at the ninth meeting of the Central Committee for Financial and Economic Affairs held on March 15, 2021.

3 Improve Technical Policies to Support Green, Circular and Low-carbon Development Achieving the carbon neutrality goal must be supported by technological innovation. Advanced energy-saving and low-carbon technologies become the frontier of science and technology as well as key areas for competition among major powers. We should give full play to the supporting and leading role of science and technology, increase investment in technological innovation, foster independent innovation in carbon neutral technologies, and value the development of patented technologies, including integrated technologies for clean coal utilization, new and renewable energy technologies, technologies for efficient and circular use of resources, and green manufacturing technologies. We should cultivate a new low-carbon product market and

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competitive edge, accelerate the R&D and promotion of energy saving and efficiency improvement, clean coal, renewable energy, nuclear energy and related lowcarbon technologies, value the introduction, digestion, absorption and re- innovation of state-of-the-art technologies in related fields, and promote China’s economic development driven by energy conservation and innovation instead of dependence on energy resources. We establish a scientific and reasonable evaluation system and methods, and provide theoretical guidance, policy proposal and technical support for carbon peaking and carbon neutrality. We strengthen the R&D and commercialization of deep decarbonization technology, and actively respond to international economic and technological competition in the context of global carbon neutrality. The EU proposes completing the industrialization of key technologies for deep decarbonization by 2035. The Biden administration plans to increase investment in R&D in the fields of hydrogen energy, energy storage and advanced nuclear energy, so that the production cost of hydrogen energy is equivalent to that of shale gas, grid-scale chemical energy storage costs one-tenth of current lithium batteries, and the construction cost of small modular nuclear reactors is halved. Japan holds advantages in the storage and transportation of renewable energy-based hydrogen, hydrogen-based power generation and fuel cell vehicles, aiming to reduce the cost of integrated systems for hydrogen utilization to that of imported liquefied natural gas. China must foster technological innovation, seek opportunities and advantages in the competition for advanced decarbonization technologies, and build core competence. We make plans to accelerate the R&D and commercialization of advanced technologies, study and propose a roadmap for low-carbon technologies. We promote the R&D and application of high-energy-efficient and low-carbon technologies, and establish low-carbon technology systems such as cleaner production, energy saving and efficiency, clean coal and clean energy, recycling and efficient utilization of resources as well as carbon sinks. We study and develop technologies for efficient coal-fired power generation, CCUS, high- performance power storage, ultra-efficient heat pumps, hydrogen production processes, equipment, transportation and storage, etc., and establish technical reserves to support green and low-carbon transition. A sound innovation system has been put in place. We support cooperation among enterprises, universities, and research institutes with enterprises as the mainstay, promote the expansion of innovative talents, and build a talent system for an innovationoriented country. We support the R&D of major technical equipment as well as key generic technologies in major industries. We foster international exchanges and cooperation on climate change and create the image of China as a responsible major power. We formulate a master strategy for foreign cooperation, take the initiative and become motivated in the face of pressure. We strive to avoid problems that breach the WTO rules in terms of slowing down greenhouse gas emissions, green industry development, intellectual property protection, and trade in resources and raw materials. We adjust the “going global” strategy for enterprises, make rational use of overseas resources and energy, and ensure institutional rules of social responsibility and industrial transfer for enterprises that make overseas investments. We regard energy conservation, environmental protection and

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response to climate change as the priority of overseas aid, and establish an image of upholding green development.

4 Promote System Building for Green and Low-Carbon Standards The Technical Committee (TC) 207 for Environmental Management of the International Organization for Standardization (ISO) is responsible for advancing the work in the field of greenhouse gas management, including environmental management system—lifecycle assessment, material flow costs, environmental awareness design, environmental performance, environmental information exchange, greenhouse gas management, green finance and other relevant technical standards. It has issued over 50 pieces of international standards, including the well-known environmental management system (ISO14001). The ISO/TC207, keeping enriching and expanding its connotations and extensions, has not only formulated standards for green finance, environmental cost accounting, etc., but also developed standards related to ecology and green development. The Sub-Technical Committee on Greenhouse Gas Management (ISO/TC207/SC7) is responsible for issuing standards on greenhouse gas management accounting, reporting, verification, carbon footprint, adaptation, etc., with more than 10 pieces of standards having been issued.5 The Technical Committee on Carbon Dioxide Capture, Transportation and Geological Storage (ISO/TC265) is formulating six pieces of key international standards for carbon reduction and carbon neutrality. The ISO is making rapid progress in developing international standards. Chinese experts have won the right to take the lead in formulating two pieces of international standards, and are also actively involved in the formulation of other relevant standards. China’s Working Group on CCUS Standards was established in March 2021, with a view to contributing Chinese wisdom to international standards on carbon dioxide capture, transportation and geological storage. The EU has been working to reduce carbon emissions. The EU Green Deal was issued in 2019. In 2020, leaders of 27 EU member states agreed on a e750 billion “recovery fund”, with particular reference to the resolution on Carbon Border Adjustment Mechanism (CBAM): designing CBAM compatible with the WTO, incentivizing European industry and EU trading partners to reduce industrial carbon content, supporting EU and global climate policies in line with the objectives of the Paris Agreement to achieve carbon neutrality without these being mistakenly used as tools for trade protectionism, unjustifiable discrimination or restriction, addressing greenhouse gas emissions embedded in EU industry and international trade, being non-discriminatory and working to ensure a level playing field. In 2021, a detailed proposal was put forward for a “carbon border adjustment tax”, and tariffs are imposed on imported goods that do not meet EU environmental standards. This 5

Lin Ling (2021).

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“carbon border adjustment tax” proposal has attracted great attention from relevant Chinese departments and enterprises. How to implement the CBAM? How to calculate and collect the carbon tax under the framework of this mechanism, and what impact does it have on trade activities? A standard recognized by all countries in the world is required in this regard. We do a good job in standardization on carbon peaking and carbon neutrality: First, we make top-level planning, and establish a sound technical standard support system for “dual carbon” goals. Second, we keep to the principle of demand-oriented and priority of urgent use, formulate urgently needed technical standards, and harmonize relevant national standards on carbon peaking and carbon neutrality. Third, we establish the integrated application program for standard systems on energy saving, low carbon, ecology, environmental protection, recycling, etc. Local governments, enterprises, public institutions and other entities can make good use of relevant technical standards to save energy and reduce carbon emissions. Fourth, we promote the standardization of green finance and support the work on carbon peaking and carbon neutrality. Fifth, we build a sound regulatory system. Guided by the “dual carbon” goals, we form an innovative model that can promote technology R&D, development of standards, promotion and application, and green finance. Led by the standards on mandatory energy consumption quota, the energy efficiency of energy-using products, carbon intensity, etc., China has established a technical standard system covering energy production and consumption, and key industry fields. It comprises five areas: direct emission reduction, indirect emission reduction, coordinated emission reduction, management assessment and market-oriented mechanism. Standards on direct emission reduction cover the clean utilization of fossil energy, the production and supply of new and renewable energy sources, as well as controlling emissions in the production process, substitution of raw materials, etc. Standards on indirect emission reduction cover energy consumption, including energy efficiency improvement in such fields as industry, buildings, and transportation, the use of new energy, application of related low-carbon technologies, and so on. Standards on coordinated emission reduction cover supply and demand matching, balanced energy mix, coordinated pollution and carbon emissions reduction, as well as solid waste recycling, ecological restoration, etc. Management standards involve accurately calculating carbon emissions of enterprises and public institutions, emission reductions of projects, and choosing advanced technologies with good energysaving, low-carbon and cost-effective performance. We establish and implement an energy and environmental management system, and evaluate the effectiveness of energy-saving and low-carbon technologies, as well as management measures. The standards on market-based mechanisms cover the foundation necessary for regulating businesses related to green finance and trading mechanism to ensure commercial sustainability; and also support the relevant standards involved in the technology paths to carbon neutrality. China has issued upwards of 1000 pieces of standards in various areas, including 111 pieces of energy consumption quota standards in the target sector and 74 pieces of standards on energy efficiency for terminal energy-using products. These have played a key role in energy conservation and carbon reduction. Energy consumption

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standards lead to energy savings of 77 million tons of standard coal, equivalent to reducing carbon dioxide emissions by 148 million tons and nitrogen oxide emissions by 266400 tons; save electricity by 49 billion kWh, equivalent to reducing carbon dioxide emissions by 2.9 million tons, nitrogen oxides emission by 6370 tons, and soot emission by 1470 tons.6 We have a long way to go in improving the standard system. We are woefully lacking in technical standards and methods, and the concept of carbon neutrality is not clearly defined. Joint efforts are needed to make improvements. The mechanism for implementing standards is imperfect, and quite a lot of standards are not known: people don’t know where to find and how to use these standards. Standard can really play a role only when people pay attention to and understand standards. Setting standards is important, so is implementing them. Chinese management standards for carbon emissions. Since 2015, the National Technical Committee on Carbon Emissions Management Standardization (SAC/TC 548) has organized the formulation of and issued 16 pieces of standards on carbon emission accounting and reporting, covering key industries such as power generation, iron and steel, building materials, and smelting. Nearly 20 pieces of national standards on carbon accounting and reporting in industries such as electronic equipment manufacturing, planting, public construction, coking, land transportation, machinery and equipment manufacturing, mining, fluorine chemical engineering, water transportation, papermaking, food and tobacco, oil and gas, petrochemical engineering, nonferrous metals, and large-scale breeding of livestock and poultry, as well as verification procedures, verification agencies, and verification personnel have been submitted for approval, which can provide a basis for enterprises to conduct carbon emission accounting, reporting, verification, etc. Based on the formulation of standards, a carbon emission accounting technology service platform has been established, including carbon emission accounting methodologies used in different industries. The total amount of carbon emissions can be directly calculated when enterprises fill in data, which is convenient to use and also facilitates local management.

5 Increase Investment in Green and Low-carbon Development Related to Carbon Emission Reduction We take practical steps to tackle climate change: First, promote energy conservation and emission reduction, and strive to control greenhouse gas emissions. Second, become more adapted to climate change. Third, maximize the supporting and leading role of science and technology. Fourth, develop a green economy and low-carbon economy in light of national conditions. Fifth, regard proactive response to climate change as a key part of the strategy of achieving sustainable development and include it in the national economic and social development plan, and clearly define the goals, tasks and requirements. 6

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After the carbon neutrality goal is set, specific tasks are assigned to all regions. Local governments hold the key to realizing the goal. In order to promote carbon emission reduction, a pilot program of the low-carbon city has been carried out since 2010. The prominent problems are insufficient financial support and lack of initiative of local governments in piloting the program. According to studies, an annual investment of about 3.1 trillion-3.6 trillion yuan is needed to realize carbon peaking before 2030. The current annual capital input is only 525.6 billion yuan, indicating a shortage of over 2.5 trillion yuan per year. To achieve carbon neutrality by 2060, an additional over 139 trillion yuan must be invested in new energy-based power generation, advanced energy storage, green zero-carbon buildings and other fields.7 From the perspective of China’s fiscal funds, there is no public funding income directly related to this except for the state revenue of the Clean Development Mechanism (CDM) project and the renewable energy-based electricity price surcharge. In the future, we should improve the investment and financing systems and mechanisms related to carbon emission reduction, and increase the source of funds as well as fiscal appropriations for local governments to help achieve carbon peaking and carbon neutrality in local areas. From an investment perspective, the current investment and related construction bring high carbon intensity, making it harder to reduce total carbon emissions. In the future, China should give more prominence to the agenda of addressing climate change in investment and achieve green recovery. Low-carbon sectors such as renewable energy are ideal targets for investment during the 14th Five-Year Plan period. From 2020 to 2025, there will be a total direct investment of 9.31 trillion yuan in relevant infrastructure such as 5G, UHV transmission lines, high-speed railways, electric vehicle charging piles, big data centers, and artificial intelligence, as well as “new infrastructure” such as the industrial Internet of Things, which will drive a nongovernmental investment of 16 trillion yuan. Renewable energy investment promises greater potential because of the advantages of stimulating the economy and creating jobs, as traditional infrastructure construction provides. It also has the “new infrastructure construction” advantages of promoting China’s long-term quality, green and sustainable development. Making investment in zero-carbon sectors like renewable energy, infrastructure sector such as green and efficient urbanization, as well as electrification of end-use energy should be priority options for China’s green recovery. In terms of hydrogen energy, green hydrogen will be applied on a large scale to many fields such as transportation and industry as the cost of zero- carbon electricity and hydrogen production equipment decreases. By 2050, China will require 81 million tons of hydrogen.8 When the cost of electrolytic cells is US$100 per kW and the price of zero carbon electricity is US$30 per MW by 2050, the cost of green hydrogen will fall to US$10–15 per kg, which is lower than the cost of coal-based hydrogen. In the future, hydrogen will be applied to much more areas, achieving a scale effect. The application scenarios of hydrogen include industrial processes such 7

Liu Manping (2021). Beijing Energy Club, “Summary Report on How China Achieves Carbon Neutrality by 2060”, China-cer.com.cn, October 28, 2020.

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as steel, cement, and chemical engineering, as well as transportation fields such as heavy-duty transportation, light-duty transportation, and air freight. According to the technical maturity, cost-effectiveness and associated industries for hydrogen energy utilization in different fields, hydrogen energy will first be applied to road transportation, and subsequently be extended to industrial fields such as synthetic ammonia and direct reduced iron, as well as ships, aviation fuel and power-to-X fields in the later period. By 2050, there will be 600 million tons of standard coal in terms of potential biomass resources, which meet the demand for 440 million tons of standard coal under a zero-carbon scenario. Due to the uneven distribution of biomass resources, high transportation costs, etc., the priority of application should be given to areas where there are limited zero-carbon solutions or high costs such as aviation and chemical raw materials. Most biomass resources may be applied to the field of power generation. In terms of carbon capture, China’s CCS capacity exceeds one billion tons per year. Given China’s economies of scale as well as the cost advantages of the learning curve effect, CCUS will play a key role in China’s zero-carbon transition process. To increase the channels of investment and financing, funds related to low-carbon transition or carbon neutrality can be set up. Because of China’s vast territory, the industrial structure and resource endowments vary from region to region, and different regions, industries and enterprises face different constraints and challenges. For example, the low-carbon transition will be bound to expedite the process of “coal reduction”, which will cause many layoffs in high-carbon industries such as coal. This will have a great negative impact on coal-rich but economically underdeveloped areas such as Shanxi and Inner Mongolia. The cost is high, and the transition will be more painful. It is necessary to draw on the EU’s fair transition mechanism, in which countries establish a low-carbon transition or carbon neutrality related fund. The special fund helps these regions and groups by supporting the training of workers and job transfer in the traditional energy industry, so as to avoid social problems such as poverty caused by low-carbon transition and other negative impacts.

6 Develop Green Finance and Support Related Technologies and Industries Monetary policy tools for carbon emission reduction may fall into three categories: First, conventional monetary policy, which is open market operation and reserve requirements. In terms of open market operation, the People’s Bank of China directly or indirectly purchases green assets and guides more financial resources to areas for sustainable development. In terms of required reserves, the People’s Bank of China can use differentiated statutory required reserves to promote the development of green industries. The second is the refinancing policy. The People’s Bank of China can incorporate green standards into the collateral framework, thereby changing the

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asset portfolio held by commercial banks. If assets in high-carbon industries become unqualified collateral, the proportion of high-carbon assets held by commercial banks should be reduced. Improving the collateral framework of the central bank can affect the financing costs of different industries, and optimize the industrial structure. The third is the credit support policy. We establish a green credit framework to guide banks to issue more loans to green industries. For commercial banks holding privileged green assets, the central bank will reduce loan interest rates to expand green investment.9 Financial policy is a generic term for a full variety of policies and measures that the People’s Bank of China adopts to adjust the level of currency, interest rates and exchange rates in order to achieve the goals of macroeconomic regulation. A green financial system is established and guided to provide the funds needed for carbon neutrality in a market-oriented manner. We strengthen the R&D of key technologies for carbon neutrality, and make technical breakthroughs to support the low-carbon, clean, decentralized and intelligent development. We promote the implementation of policies on green credit, leasing, etc., and raise the credit threshold for energyintensive and highly polluting projects. We promote the “Equator Principle”, and prohibit loans to energy-intensive and highly polluting projects. We pilot local green bonds to support the development of green, low-carbon and circular industries. The recycling, classification and reuse of waste resources can improve the output value of resources, and also play a role in improving environmental quality and tackling climate change. Recycling the coke oven gas produced in the coal coking process for power generation or production of chemicals such as methanol can increase the supply of raw materials, and also turn waste into treasure. Energy-saving, lowcarbon and environmental protection enterprises are encouraged to go public and attract social funds on the capital market to the field of green development. Financial institutions should play an exemplary role in achieving “dual carbon” goals. According to relevant estimates, carbon dioxide emitted by China’s financial institutions accounts for 3‰ or less of the total in the country. Moreover, financial institutions have strong financial strength. According to relevant calculations, the cost of carbon emission reduction by financial institutions will not exceed 1‰ of their revenues, which is entirely affordable. Many financial institutions in foreign countries have become carbon neutral. Of more than 130 financial institutions among the Global Fortune 500, 40 to 50 foreign-funded financial institutions have become carbon neutral, and many institutions proposed achieving carbon neutrality by 2030 and 2035.10 None of the world’s top 500 financial institutions that have become carbon neutral is a Chinese-funded institution. Haitong International is the first Chinese financial institution to propose becoming carbon neutral by 2025. China’s financial institutions are capable of becoming carbon neutral. In China’s economic structure, there are many service industries with low carbon emissions and strong financial strength, just like financial institutions. For example, it is easy for the information industry or many high-tech enterprises to become carbon neutral. If financial 9

Wang Chen et al. (2021). Sun Mingchun (2021).

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institutions take the lead, other companies will follow, and the amount of carbon reduced will not merely be a few thousandths or a few percent. Financial institutions can deeply participate in the carbon trading market and promote carbon neutrality through the carbon market price mechanism. It is impossible for financial institutions to emit no carbon dioxide. To achieve carbon neutrality, some emissions are achieved through carbon offset or carbon credits purchase, thereby increasing the demand for carbon trading markets. There are currently eight local carbon trading markets in China, with little trading volume and large price differences. If financial institutions take the initiative to make purchases, they can increase demand, invigorate the market, and push up the prices of carbon trading. A rise in carbon prices is a market subsidy for carbon reduction enterprises and green enterprises, and will help incentivize enterprises to reduce carbon emissions and boost the output of green products and technologies. At the same time, it will increase the costs of high- carbon enterprises to promote them to reduce emissions. A carbon trading market can be a financial market. In addition to entering carbon trading markets as a buyer, financial institutions can participate in the operation of markets, and provide financial derivatives (e.g., carbon futures, and carbon options), as well as establish carbon funds and issue products to institutional investors and even retail investors. Of course, this will not be achieved until carbon trading has a certain level of activity. There will be a huge market for carbon trading, with high demand and rising prices. Carbon credit is also a good investment product. Green bonds, green loans, ESG investments, etc., are the ways for financial institutions to support carbon peaking and carbon neutrality. It is a global trend that financial institutions play a greater role in climate investment and financing.11 We promote the integration of regulation and law enforcement. We step up efforts to supervise and manage the work such as data submission, verification, and allowance fulfillment by key emitters in the national carbon permit trading market. We organize the implementation of ecological environmental supervision and law enforcement in accordance with laws and regulations. We encourage enterprises to disclose information on greenhouse gas emissions, and support some regions in taking the lead in exploring an information disclosure system for corporate carbon emissions. We strengthen the supervision of ecological protection in key areas such as nature reserves and ecological conservation redlines, monitor and evaluate the effectiveness of ecosystem protection and restoration, and boost the carbon sequestration function of ecosystems as well as adaptability to climate change. We promote the integration of supervision and assessment. We promote ecological environmental protection inspection to cover the prominent problems in climate change response related work, the fulfillment of carbon peaking goals and tasks, etc., and see that problems found during the inspection are put right. We strengthen the target responsibility system for controlling greenhouse gas emissions as a key part of the ecological environment-related assessment system, and step up efforts to assess the work related to climate change response. We admonish the people’s 11

Liu Liange, “Contributing Financial Power to Achieving Emission Peak and Carbon Neutrality”, China Finance, No. 10, 2021.

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governments and the persons responsible for their relevant departments in regions where goals and tasks are not completed in accordance with regulations. We see that the responsibility for responding to climate change is earnestly fulfilled.

7 Improve Institutional Arrangements for the Development of the Carbon Market The use of the market mechanism is essential to achieve “dual carbon” goals with higher efficiency at a lower cost. As a market-oriented policy tool for low-cost carbon emission reduction, the carbon trading market primarily serves two functions: One is to incentivize the new energy industry or the non- fossil energy industry to solve the issue of positive externalities of emission reduction. The other is to constrain the fossil energy industry to solve the issue of the negative externality of carbon emissions, thereby improving the energy structure with the highest efficiency at the lowest cost and making more efficient energy utilization. China carries out pilot programs in the areas of contract energy management, water permits, mining permits, pollution permits and carbon emission trading. Carbon trading is a type of trading in proven carbon emissions rights based on three mechanisms for emission reductions under the Kyoto Protocol: emissions trading, joint fulfillment, and the Clean Development Mechanism (CDM). Under the Kyoto Protocol, carbon emissions can be traded among companies in developed countries. Previously, China participated in the international carbon market primarily in the form of selling certified emission reductions (CER) through the CDM project. Ecological warrants trading offers a good way to realize that “lucid waters and lush mountains are invaluable assets”. For some areas that are economically poor despite the lucid waters and lush mountains, we should give certain economic value to the ecological environment. Specifically, starting with a certain year, any changes in forest stock, the amount of carbon dioxide absorbed, etc., are converted into tradable ecological warrants, which are then monitored, certified and traded by third parties, thus benefiting those who protect the ecological environment. The establishment of an emissions permits trading market sends a message that carbon has a price. In the pilot program of ecological progress conducted by the National Development and Reform Commission and other departments, efforts are made to explore the pilot trading in ecological warrants (including energy saving, water saving, carbon emissions, and carbon sinks), and establish relevant trading systems. According to the ecological accounting by the State Forestry Administration, the value of ecological services enjoyed per capita in China is more than 10,000 yuan per year, but those who protect the ecological environment have not received due remuneration. Institutional innovation is needed to change this pattern. It is essential to summarize the experiences of China’s pilot provinces and cities, improve the carbon market system, promote the healthy development of the future carbon markets, and even pursue low-carbon development in China. In order to build

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China’s carbon market into a market that can optimize the allocation of emission reduction resources, we must make progress in many respects, including stipulating total quantity control, continuously enhancing basic capabilities, improving systems, gradually opening up the secondary market, building a national unified market on the basis of pilot programs, exploring convergence with the international market, etc. We build a unified national carbon emissions trading market, and make systematic arrangements in terms of carbon emission allowances, the scope of participation, pricing mechanism, etc. to optimize resource allocation, manage climate risks, and discover emission prices, with the goal of efficiently reducing carbon emissions at low cost. We steadily promote the establishment of carbon emissions permit trading market mechanism, improve the accounting recognition and measurement of carbon assets, establish a sound risk control mechanism for the carbon emissions permit trading market, expand the scope of trading entities, and increase the participation of institutional and individual investors who meet trading rules in carbon emissions permit trading in a timely manner. We establish a basic statistical system for greenhouse gas emissions. We summarize the practices of greenhouse gas inventory, setting of statistical indicators, etc. in the pilot areas; incorporate the basic statistical indicators of greenhouse gas emissions into the statistical indicator system; and improve the statistical system for the accounting of greenhouse gas emissions covering such fields as energy activities, industrial production, agriculture, change in land use as well as forestry and waste disposal. We strengthen the accounting of greenhouse gas emissions. We prepare guidelines for the formulation of greenhouse gas emissions lists, and standardize list formulation methodologies and data sources. We study and promulgate guidelines for the accounting of greenhouse gas emissions in key industries and enterprises, and improve them in practice. We establish a data information system for greenhouse gas emissions, do a good job in the calculation of emission factors as well as data quality monitoring, and ensure data authenticity and accuracy. We establish a threetier basic statistical and accounting system for greenhouse gas emissions for different entities such as the state, local regions and enterprises, and build a professional team responsible for statistical accounting of greenhouse gas emissions. We implement a system whereby key enterprises directly submit data on energy consumption and greenhouse gas emissions. Carbon pricing policies have become an effective instrument for more countries to incentivize emission reductions. Total quantity control and carbon pricing mechanisms are used to guide various market entities to reduce emissions on their own initiative. Based on the market means of total quantity control and allowance trading, the Ministry of Ecology and Environment issued the Administrative Measures for Carbon Emissions Permit Trading (Trial) on January 5, 2021, which stipulate the responsibilities, rights and obligations of competent government departments and market entities, as well as the key links and work requirements for the operation of the national carbon market, so as to regulate national carbon emissions permits

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trading and relevant activities. As the world’s largest carbon market, China’s carbon market was launched on July 16, 2021. Carbon trading should cover more industries to better reflect the comparative advantages of different entities in terms of cost differences in emissions reduction. In pilot areas, large enterprises in specific industries are promoted to participate in carbon market trading, exerting a significant impact on energy saving and emission reduction. We should expand the carbon market to cover energy-intensive industries such as steel, cement, aluminum smelting, petrochemical engineering, chemical engineering, nonferrous metals, and aviation as soon as possible, and gradually replace trading in energy use rights with carbon emission trading. We should explore the possibility of “zero-carbon emission agricultural farming” activities participating in the carbon market, and include changes in carbon emissions caused by land use and changes in land use into the scope of voluntary trading. Under the premise of controllable risks, we support institutions and capital owners in developing financial products and services related to carbon emission rights, and explore and operate derivative products and businesses such as carbon futures in an orderly manner. We encourage enterprises and institutions to fully consider the impact of future market carbon prices in investment activities. We develop new methodologies. We make good use of methodologies approved by the UN CDM Executive Board, and study and enrich China’s application cases. At the same time, we increase the R&D of methodologies in the fields of energy saving and emission reduction for large buildings, zero- carbon farming methods, etc., and form a methodology in line with China’s reality, so as to create conditions for China to certify carbon emission rights. We study the imposition of a carbon tax. Ecological labels or green labeling systems are established, and fiscal and tax policies are reformed to motivate enterprises and the general public to save resources and protect the environment. An ecological warrant can be designed to benefit those who contribute to ecological conservation through monitoring, certification and trading. The use of performancelinked management measures helps to achieve common prosperity while avoiding faults such as fraud. It helps to stimulate the enthusiasm of participants, and also achieves the purpose of increasing forest cover and improving ecology. We tighten lifecycle management, and make progress in terms of determining the allowances of the total amount, verifying and confirming transaction credit, ensuring a just, fair and open market, legal and recorded transactions, benefits for all parties involved, and the recognition of transactions, so as to ensure that the carbon market achieves the expected results. Only through concrete action can we improve the mechanism, cultivate personnel, and develop capabilities, thereby creating a policy and market environment for the development of China’s carbon market.

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8 Enact laws and Regulations to Tackle Climate Change, and Promote the Realization of the “Dual Carbon” Goals in Accordance with the Law As a responsible major developing country, China has always attached great importance to the issue of climate change. In June 1992, China signed the United Nations Framework Convention on Climate Change (UNFCCC), which was officially ratified by the Standing Committee of the National People’s Congress (NPC) at the end of the same year. The Standing Committee of the NPC has successively enacted or revised a slew of laws related to tackling climate change, such as the Law on Conserving Energy, the Renewable Energy Law, the Circular Economy Promotion Law, the Cleaner Production Promotion Law, the Forest Law, and the Grassland Law. In 2007, China’s National Climate Change Program was promulgated. China has improved relevant working mechanisms, adopted a slew of measures and practical actions to deal with climate change, and worked to mitigate and adapt to climate change, and remarkable achievements have been made. These make positive contributions to the protection of the global climate.12 The State Council issued China’s National Climate Change Program in 2007 and the Responding to Climate Change: China’s Policies and Actions (White Paper) in 2008, which put forward systematic guiding ideas, goals and principles for responding to climate change. We uphold the basic national policy of conserving resources and protecting the environment, set the goal of enhancing capacity for sustainable development, secure the support of scientific and technological progress, move faster to transform the growth model, endeavor to control greenhouse gas emissions, and improve the capacity to respond to climate change. According to the Resolution of the Standing Committee of the NPC on Actively Responding to Climate Change adopted in August 2009, “we will incorporate the strengthening of legislation to deal with climate change in the legislative work agenda as a key task of forming and improving the socialist legal system with Chinese characteristics.” In 2015, the Opinions of the CPC Central Committee and the State Council on Moving Faster to Promote Ecological Progress required studying and enacting laws and regulations on responding to climate change. In 2016, the climate change response law was included in the research projects of the State Council’s Legislative Work Plan 2016. In May 2018, the CPC Central Committee promulgated the Legislative Revision Plan for Incorporating Socialist Core Values into the Rule of Law, which proposes promoting the harmonious development of human and nature and establishing a strict legal system for ecological conservation. All these have created favorable conditions for enacting laws on responding to climate change. The Interim Rules on the Administration of Carbon Emissions Trading have been issued and implemented. Departmental regulations implemented include the Interim Measures for the Operation and Management of Clean Development Mechanism 12

“Motion of the Standing Committee of the NPC on a Draft Resolution on Responding to Climate Change”, npc.gov.cn, August 25, 2009.

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Projects, the Measures for the Administration of the Clean Development Mechanism Fund, the Interim Measures for the Administration of Voluntary Greenhouse Gas Emission Reduction Trading, the Administrative Measures for the Certification of Energy-saving and Low- Carbon Products, the Measures for the Administration of Carbon Emissions Trading (for Trial Implementation), etc. At the local level, Qinghai and Shanxi issued local regulations or rules such as measures for responding to climate change. Sichuan, Hubei and Jiangsu are advancing local comprehensive legislative work. Nanchang, Shijiazhuang and other cities issued regulations to promote low-carbon development. Shanghai, Shenzhen and other cities issued special local regulations for carbon emissions trading. These lay sufficient legal support for enacting laws to tackle climate change.13 Achieving the long-term low-carbon development strategy and the goal of carbon neutrality are the core content of China’s system for ecological progress. The first is to promote legislation on climate change to ensure the realization of the carbon neutrality goal in the form of law. The second is to deepen the reform of the management system, ensure the target responsibility system for the indicators and tasks of governments at all levels regarding energy conservation and carbon reduction, establish a sound coordination mechanism, and form a synergy for all departments and local governments to promote the green, low-carbon energy and economy transition. The third is to improve the supporting policy system for low-carbon transition; integrate or replace the energy intensity and total energy consumption control system with the dual control mechanism for the reduction of GDP carbon dioxide intensity and total carbon emissions; and replace the energy use permit system with the corporate carbon emission allowance system. The fourth is to incorporate carbon peaking and carbon neutrality into the national economic and social development plan, set the goals, tasks and requirements, and add relevant provisions in laws and regulations on energy, energy conservation, agriculture, forestry, water resources, etc. We establish and improve the corresponding fiscal, tax and financial policy support system, collect carbon taxes or adopt other fiscal, tax and market means as well as measures in a timely manner, and establish mechanisms and management systems for the emission statistics, monitoring and assessment of greenhouse gases such as carbon dioxide on the basis of the existing statistical, monitoring and assessment systems for pollution and carbon emissions reduction.

9 Build an Ecological Culture in Society to Enhance Public Awareness and Capacity to Tackle Climate Change Building a beautiful China requires public involvement and joint action. It calls for public engagement, and the key lies in leadership. Decision- makers at all levels reach the consensus that “carbon neutrality is a key policy orientation”, and abandon the concept of “prioritizing the economy over the environment, prioritizing speed over 13

Chang Jiwen and Tian Danyu (2021).

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benefits, prioritizing local results over the overall picture, prioritizing the present over the long term, and prioritizing interests over people’s wellbeing”. We have no reason to and must not follow the outdated path of “treatment after pollution” pursued by developed countries. If China increases GDP by means of excessive consumption of resources, and the emissions of waste and greenhouse gases, it will not only worsen the present living environment, but also deplete the resources and survival space of future generations. While carbon dioxide is primarily emitted during energy-intensive production processes, a key driving force is the various consumption activities that meet the needs of our daily life. In order to achieve the “dual carbon” goals, it is necessary to meet the needs of both production and life, and correspond to green, energy-saving products, making constant innovations. On the one hand, we should move faster to establish a green production technology system, promote green product production, develop a model of green energy use, increase electrification in society, and adopt a model of low-carbon consumption for living. Under the concept of the full lifecycle, we promote clean energy supply, technological upgrading and intelligent manufacturing to realize the sustainable use of resources in all links of the manufacturing industry. We explore the application of carbon negative technologies such as CCUS in the whole lifecycle to produce truly energy- saving, low-carbon, high-quality and inexpensive products, thus creating space for meeting people’s reasonable needs for living and development. We should make plans for green materials for buildings and a balanced energy mix, explore the R&D of building technologies for “energy production” and “carbon sequestration”, and build low-carbon and beautiful communities and homes while reducing construction and maintenance costs. On the other hand, a transition to a green way of life can in turn promote the R&D of green production technologies as well as clean production, and from a virtuous circle of low-carbon production and consumption. Price, fiscal, tax, trading and other means are used to guide low-carbon production and living, and promote a change of behavior such as waste sorting, reducing air conditioning use, and choosing products with energy-saving labels, which not only reduce the “carbon footprint” of individuals and families, but also force enterprises to pursue greener production, thus achieving the effect of overall carbon reduction in the industrial chain. To promote public participation in the green, low-carbon transition, it is not only necessary to raise low-carbon awareness, but also to use market incentive mechanisms such as carbon inclusiveness, assign clear market value to low-carbon behavior, and promote residents to contribute to the “dual carbon” goals “during and after work”.14 We incorporate ecological civilization into the education system. We should popularize ecological and environmental knowledge in schools and universities, as well as through adult education, lifelong education, and publicity and training activities in a basic, extensive, enduring, targeted, and interesting manner. We should promote publicity and education on respecting nature, cherishing life, protecting the environment, conserving resources, and ensuring coexistence in a universal, routine, and 14

Chen Shaoqing et al. (2021).

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long-term manner in society. We uphold ecological ethics that everyone follows and supervises as well as ethical norms and institutional incentive systems for ecological equity and justice. We give play to the role of communities and organizations, and improve a long-term mechanism for minimizing resource consumption, and maximizing efficiency and services, so as to ensure equality, efficiency and justice, and all people doing their best and finding their proper places. We strengthen publicity and guidance. We conduct publicity events such as “June 5 Environment Day” and “National Low Carbon Day”, use regular news releases, new media on government affairs, etc. to coordinate publicity and education on climate change response and eco-environmental protection, organize various science popularization events, and promote a culture of green, low-carbon development, and frugal consumption. We encourage and promote large-scale campaigns for carbon neutrality, and publicize typical cases. We promote the concept of ecological conservation to the international community, publicize our achievements in green and lowcarbon development and response to climate change, and tell well the Chinese story of ecological conservation. We launch campaigns to promote ecological conservation. We formulate corresponding incentive measures to promote the building of a low-carbon society. We support and encourage enterprises and all sectors of society to take low-carbon actions. Enterprises should voluntarily undertake social responsibility. We should put into practice ideas on ecological conservation in our everyday life, pursue a green and low-carbon way of life and consumption, and actively engage in waste sorting, protecting public health, afforestation, etc. We say no to disposable chopsticks and foil-type plastic bags, but use “vegetable baskets”, reuse packaging, etc. We perform the role of supervision, establish a sound environmental protection whistleblowing system, ensure unimpeded channels for environmental rights protection, complaints, and whistleblowing, participate in environmentally friendly activities, and pursue a green way of work and life. We establish an industrial structure, as well as modes of production and consumption that conserve resources and protect the environment. Only by sharing the same concerns can we have common wisdom. Only by acting in concert can we have a common future. Only through the joint efforts of society can we improve the ecological environment, enjoy the common and only beautiful home, and usher in a new era of ecological conservation earlier!

References Wang Chen, Li Deshangyu, Sun Yu, “National Carbon Market Will Be Launched, Executive Meeting of the State Council Proposes Monetary Policy Tool for Carbon Emission Reduction”, 21st Century Business Herald, July 7, 2021. Zhou Hongchun, Policy Framework and Basic System for Promoting Ecological Conservation”, China Sustainable Development Report 2014: Building Institutions for Ecological Civilization, Science Publishing House, 2014. Chang Jiwen and Tian Danyu, “Legislative Inquiry on Law on Tackling Climate Change”, Chinese Journal of Environmental Management, No. 2, 2021.

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Lin Ling, “Energy Saving and Low Carbon Standards Contribute to Emission Peak and Carbon Neutrality”, the 3rd China Carbon Trading Market Development Forum, May 15, 2021. Liu Manping, “12 Policy Proposals for Achieving Carbon Neutrality in China”, Xinhua Finance, January 22, 2021. Sun Mingchun, “The Overall Plan for Emission Peak and Carbon Neutrality Should be Formulated as soon as Possible,” China Finance 40 Forum, March 4, 2021. Chen Shaoqing, Xia Chuyu, and Chen Bin, “Planning Emission Peak and Carbon Neutrality with Systematic Thinking,” theory.gmw.cn, April 29, 2021.

Chapter 9

Carbon Pricing Mechanism for Carbon Peaking and Carbon Neutrality Wenjun Wang, Chonghui Fu, and Xujie Zhao

Of the various policies and campaigns to tackle climate change and reduce greenhouse gas emissions, the carbon pricing mechanism is a type of fiscal and tax policy. A message is sent through the pricing of carbon emissions: carbon emissions must be paid, thereby promoting economic entities to reduce greenhouse gas emissions, guide a low-carbon transition in production, consumption and investment, decouple economic growth from carbon emissions, achieve carbon peaking as soon as possible, and ultimately achieve carbon neutrality. As a key carbon pricing mechanism, the carbon market is widely used in the global response to climate change. To achieve carbon peaking by 2030 and carbon neutrality by 2060, we must take more powerful policies and measures, establish a carbon pricing mechanism with reasonable binding force, give full play to the role of the price mechanism, and encourage the whole society to work towards the “dual carbon” goals.

W. Wang (B) · X. Zhao Guangzhou Institute of Energy Conversion, Chinese Academy of Sciences, Guangzhou, China e-mail: [email protected] X. Zhao e-mail: [email protected] C. Fu Shenzhen Yuntian Institute of Statistical Sciences, Shenzhen, China e-mail: [email protected] © China Financial & Economic Publishing House 2023 G. Zhuang and H. Zhou (eds.), China’s Road to Carbon Peaking and Carbon Neutrality, https://doi.org/10.1007/978-981-99-3122-4_9

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1 Carbon Pricing Mechanism 1.1 How Carbon Pricing Mechanism is Established According to previous scientific assessments by the United Nations IPCC, controlling greenhouse gas emissions caused by human activities is key to slowing down global warming. The IPCC Special Report on Global Warming of 1.5°C emphasizes that if global warming is controlled at 1.5°C above pre-industrial levels, it is necessary to achieve “net zero emissions” by 2050, which sets a “ceiling” for carbon emissions. Guided by the “ceiling”, administrators usually adopt the method of carbon pricing to reduce carbon emissions in all sectors of society. Carbon prices under different carbon emission reduction targets are different. After model research, it was found that by 2100, the carbon price will reach about US$90 per ton under the high-intensity emission reduction target, and about US$60 per ton under the medium intensity emission reduction target. Carbon prices are set by the government or formed by the market, resulting in different carbon pricing mechanisms. Carbon emission trading mechanism (hereinafter referred to as “carbon market”) and carbon taxes are the two mature carbon pricing mechanisms used globally.

1.2 Two Typical Carbon Pricing Mechanisms Carbon emission price is primarily determined through two mechanisms: the collection of a carbon tax and the carbon market pricing mechanism. Both mechanisms are instruments for controlling carbon emissions through economic means, but there are differences in the operating principle. Below is a brief explanation of the origins and features of the two carbon pricing mechanisms. Moreover, there are fiscal and market policies that promote carbon emission reduction. For example, in terms of fiscal policy, there are fiscal subsidies, fiscal discounts, and preferential fees and taxes for low-carbon industries. Market-oriented policies include policies encouraging low-carbon industries to seek direct financing in the capital market, indirect financing in the financial market, policies on interest rate floor, policies on carbon label consumption, etc.

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Carbon Market Pricing Mechanism

As a market-oriented low-carbon policy instrument, the carbon market has played an increasingly key role in the global response to climate change in recent years. The carbon market is a generic term for the three flexible emission reduction mechanisms under the Kyoto Protocol, including the joint implementation (JI), the Clean Development Mechanism (CDM) and the emissions trading system (ETS). The most widely used in the world is the ETS, particularly the EU emissions trading system (EU ETS).

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The pilot mechanism for carbon emissions trading launched by China in 2011 is also a type of ETS. Under ETS, the carbon emissions by enterprises or organizations under the ETS (hereinafter referred to as “emission control organizations”) are controlled by the government. Carbon emission allowances are issued to emission control organizations every year in accordance with the pre-set standards. If the carbon emissions by emission control organizations are lower than the allowances, surplus allowances can be sold on the carbon market for a profit. Conversely, the allowances must be purchased on the carbon market to offset the excess emissions. The carbon market is formed as a result of the sale, circulation and transfer of allowances. The initial allocation methodology of carbon allowances dictates the primary market prices within the carbon trading ecosystem. There are two basic forms of initial allocation: free allocation and paid allocation. Under the mode of free distribution, the primary market does not send a message of carbon prices, and carbon prices are found through the supply and demand competition in the secondary market. Under the mode of paid distribution, carbon prices are formed in the primary market, and the changes in supply and demand in the secondary market cause carbon price fluctuations. Compared to free distribution, the mode of paid distribution can better reflect the real cost of and demand for carbon reduction by emission control organizations. Mature methods of paid distribution in the world include auction and open bidding. Under China’s pilot carbon trading mechanism, open bidding is mainly used for paid distribution.

1.2.2

Carbon Tax Mechanism

A carbon tax is a tax that specifies the prices of greenhouse gas emissions or a measured pricing directly based on carbon (the price of carbon dioxide equivalent per ton). The taxation basis includes the carbon content in fuels as well as the greenhouse gases (carbon dioxide equivalents) emitted during the production process of other products. The tax is imposed on energy and energy derivatives such as oil, natural gas, methane and coal (World Bank, 2017). Like the carbon emission trading mechanism, carbon tax converts the environmental costs of greenhouse gas emissions into business costs through taxation. Carbon pricing prompts emitters to control greenhouse gas emissions, so as to achieve emission reduction targets. The countries that have introduced carbon taxes roughly fall into three categories: the first category is the Nordic countries represented by Finland and Denmark, which are the first batch of countries in the world to impose carbon taxes. They primarily implement an independent carbon tax system. The second category is the countries that introduce carbon emission factors into the taxation basis of the existing taxes to establish a potential carbon tax. Examples of this quasi-tax regime include the United Kingdom, Italy, and Germany.The third category consists of nations that operate both a carbon market and a carbon taxation system concurrently, utilizing a combination of cap-and-trade pricing and carbon tax-based pricing.

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The Principle of Formation of the Two Pricing Mechanisms

The carbon market mechanism is a quantity-oriented price tool. In other words, carbon prices are formed through the market transaction of carbon emission space (carbon allowances) created by the control of carbon emissions. Carbon tax is a pricebased policy tool. Through carbon pricing, the negative externalities of carbon emissions are internalized into the production costs of emitters, thereby driving producers to reduce carbon emissions by all means. These two mechanisms are used to varying degrees in different countries and regions around the world.

1.3 Carbon Pricing Mechanism, Green Tax and Pollutant Emission Trading Pricing Mechanism The issue of carbon emissions is not one of environmental pollution, but the emission reduction charging system starts with environmental problems. Pricing Mechanisms for Emission Reductions through Environmental Protection Taxes, MarketBased Emission Allowance Trading Systems, and Pollutant Discharge Rights Trading Frameworks. China’s first emission reduction mechanism is a motion regarding the pollution charging system, which was initiated in 1973 and included on the agenda of the CPC Central Committee and the State Council in 1978, and began to take effect in 1982. It gradually becomes the most standardized emission reduction pricing mechanism in China’s price reform procedures. It has evolved into China’s first green tax emission reduction pricing mechanism according to law after several reforms. The Environmental Protection Law of the People’s Republic of China was officially promulgated on December 26, 1989. Several Opinions of the CPC Central Committee and the State Council on Promoting the Reform of the Price Mechanism (Zhongfa [2015] No. 28) issued on October 12, 2015 proposed gradually establishing an emission reduction pricing mechanism in which the expenses of enterprises to discharge pollutants are higher than the cost of proactive governance. On December 31, 2017, the government emission reduction pricing mechanism for pollution charges completed its historical mission and was replaced by the green tax emission reduction pricing mechanism. On January 1, 2018, the Environmental Protection Tax Law of the People’s Republic of China entered into force and the Regulations on the Implementation of the Environmental Protection Tax Law of the People’s Republic of China were implemented. From the perspective of the tax items and the targets of pollution charges under the “tax” emission reduction pricing mechanism for environmental protection tax, the current environmental protection tax is imposed on the emission of atmospheric pollutants, water pollutants, fixed pollutants and excessive noise, while greenhouse gas emissions are not yet covered by the tax system.

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Pollutant emission trading in China is an economic means for environmental protection imported nearly 30 years ago. China’s exploration of the pricing mechanism for pollutant emission trading began in 1987 with the paid transfer of water pollution discharge indicators among enterprises in Minhang District, Shanghai. The paid use and trading of pollution permits were carried out in 30 regions across the country, mainly in the field of atmospheric and water pollution, including the control of total sulfur dioxide emissions as well as pollutant emission trading, the paid use of the initial water pollution permits, trading in chemical oxygen demand (COD) emission allowances, etc. From 2007 to 2017, the pilot program of paid use of pollution permits collected a total amount of 7.31 billion yuan in pollution charges, and the amount of pollutant emission transactions in the market reached 6.17 billion yuan. In the pilot trading markets, the primary market price is set by the government, while in the secondary market, prices are set through free bargaining. The three pricing mechanisms discussed herein are similar in terms of the management of greenhouse gas and pollutant emissions: tax collection and market transactions. The carbon market and pollutant emission trading are similar in terms of mechanism structure, because both cover policies for total emission control, a clearly defined management scope, supporting emission data tracking and supervision capabilities as well as transaction management platforms. The main difference lies in the different objects of management. The object of the pollution permit pricing is specific pollutants included in the scope (such as sulfur dioxide gas emitted, and COD discharged into the water body). The object of carbon pricing is greenhouse gases (limited to carbon dioxide in most countries and regions). Their pricing purposes are also different. The pricing of pollution permits is intended to protect the ecological environment, and reduce the damage to the environment by specific pollutants, thus falling into the field of environmental protection. Carbon pricing is intended to mitigate global climate change, falling into the field of climate risk management.

2 Classic Cases of the Pricing Mechanism of the Carbon Market The emissions trading system (aka “carbon market”, “carbon emissions permit trading mechanism” or “total carbon emissions control and trading system”) is the most widely used and promising low-cost emission reduction market instrument among the three emission reduction mechanisms under the Kyoto Protocol. Over 50% of the Parties to the Paris Agreement now operate or plan to operate a carbon market. This chapter will introduce the pricing mechanism of carbon markets through several typical cases.

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2.1 Overview of the Global Carbon Market The EU ETS is the most influential among the global emissions trading systems, accounting for over 80% of the total global carbon transactions in 2010.1 By the end of 2019, 21 carbon markets had been built in 29 jurisdictions around the world, accounting for 42% of the global GDP. Moreover, another 10 governments at different levels consider operating carbon markets as a key part of climate policy, including Colombia, Thailand and Washington State of the United States. China’s carbon market features allowance transactions, and China Certified Emission Reductions (CCER) trading is a key regulatory mechanism. It went through three development stages: from 2005 to 2012, it participated in international carbon trading through the CERs generated by CDM projects. From 2013 to 2020, a carbon emission trading pilot program was conducted in nine provinces and cities, and CERs were replaced with CCER to establish a national CCER market. By the end of 2020, a total of 2837 key emitters, 1082 non-fulfillment institutions and 11,169 natural persons participated in the pilot carbon market, with a cumulative transaction of 406 million tons for allowances and a cumulative turnover of about 9.28 billion yuan, making China the second largest carbon market in the world.2 A national carbon trading market was established in 2021, with the electric power industry being the first to be included. The national carbon trading market covers some four billion tons of carbon dioxide emissions, accounting for 40% of carbon emissions. At the carbon market level, global carbon markets fall into three categories: the carbon market of the bloc represented by the EU, national carbon markets and regional carbon markets. From the perspective of organization forms of the carbon market, there are two forms: carbon market initiated and managed by the central government and carbon market organized independently by regions. The pricing mechanisms of the various carbon market are described below.

2.2 Carbon Pricing Mechanisms for the EU Carbon Market The EU carbon market operates in 30 countries, including 27 EU member states as well as Norway, Iceland and Liechtenstein. In October 2003, the EU adopted the Directive 2003/87/EC of establishing a scheme for greenhouse gas emission allowance trading within the Community to establish the EU carbon market. Since its official launch in 2005, the EU carbon market has scored notable results and become the most influential carbon market in the world. Auctioning of allowances is the chief pricing method used on the EU carbon market. In the early stages, EU ETS made allocations largely free of charge. In the first phase (2005–2007), auctions accounted for less than 5%. In the second phase (2008–2010), it accounted for less 1

Based on World Bank Report State and Trends of the Carbon Market 2010 and the IETA Greenhouse Gas Market Report. 2 Zhang Ke (2020).

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than 10%. Since the third phase (2013–2020), auctioning becomes the “default” allocation method under the EU emissions trading mechanism, excluding industries affected by carbon leakage. In the third phase, about half of the allowances were auctioned off, mainly to power plants. Auctioning is held at least once a week, as organized by the European Energy Exchange (EEX), but member states can opt out of the joint auction platform organized by the EEX and hold auctions themselves. Germany, Poland and Britain opted out of the EEX, but Germany and Poland also authorize the EEX to organize their allowance auctions. The ICE Futures Exchange located in London is the auction platform for Britain’s allowances, and other organizations are also eligible to serve as auction platforms, but they must observe the auction procedures. The EU system chooses more frequent and smaller-scale auctions because small bidders are encouraged to participate in auctions, which facilitates price formation without causing large price fluctuations. If, under the frequent auction mechanism for allowances, few auctions are held, the cost of auction management can be reduced, but it causes market risk. For example, a small number of large companies may monopolize and increase the allowance price by purchasing allowances extensively. This also adversely affects liquidity. The Allowance Auction Procedures, promulgated in 2010 and amended several times afterwards, provide for the timing, management and other aspects of auctions (including access to auctions) to ensure that auctions are conducted in an open, transparent, harmonized and non-discriminatory manner. The Procedures stipulate the categories of participants in the auctions, and require that certain access criteria must be met before they become eligible. The main categories of buyers are emissions controlling industries with fulfillment obligations, and financial intermediaries (such as banks), which represent smaller companies and emitters. From 2012 to June 30, 2018, the cumulative auction revenue of EU ETS exceeded 26 billion euros.

2.3 Carbon Pricing Mechanism for California Carbon Market in the United States The American California Carbon Market, aka California’s cap-and-trade program, was established under the California Global Warming Solutions Act of 2006 (AB32) and came into operation in 2013. The allowance auction mechanism is used to identify carbon prices and invigorate markets. The California Carbon Pricing Mechanism uses auction reserve (minimum) prices. Auction reserve prices increase by 5% per year until 2030 to allow for inflation. In 2019, the auction reserve price in California was set at US$15.62. The unsold allowances in the auction will be sold at two consecutive auctions (the auction price is higher than the auction reserve price). The California Carbon Market has also a strategic reserve mechanism for allowances, or the Allowance Price Containment Reserve (APCR), through which

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carbon prices are controlled within a reasonable range. The APCR’s operation mechanism is as follows: the reserve allowances are divided into three parts of the same scale, and the reserve managers can sell the reserve allowances at corresponding levels at three fixed prices. If the settlement price of the last allowance auction is higher than or equal to 60% of the minimum reserve price of allowances, APCR will sell the reserve allowances by auction in a quarter prior to fulfillment. In 2019, the three fixed prices were US$58.34, US$65.65 and US$72.93, respectively. New APCR rules have been used since 2021: the reserve allowances adopt two price tiers, with the third price tier as the price ceiling. At the price ceiling level, allowances can be purchased without limit, regardless of the size of the reserve. In 2021, the two trigger points for cost containment reserve as well as price ceiling were set at US$41.40, US$53.20 and US$65.00, respectively.

2.4 Pricing Mechanism for the Pilot Carbon Market in Guangdong, China The seven pilot carbon markets in China adopt a carbon pricing method with obvious Chinese characteristics, and is basically a combination of the government-guided price and the market price. Paid allocation of allowances through open bidding is the main pricing method for the pilot carbon market. During the early stage of the pilot period, Guangdong and Hubei provinces adopted the reserve price for bidding and the government set the allowances. It is then gradually linked to carbon prices on the secondary market. As the carbon market gradually matures, the carbon pricing mechanism is moving towards the market-oriented operation. During the pilot period (2013–2016), five pilot carbon markets allocated a total of 24.37 million tons of allowances for a fee through open bidding, with a total turnover of about 920 million yuan. The paid allocation of allowances implemented in the pilot program in Guangdong is the most representative, with Guangdong being the first to determine the initial carbon price by means of open bidding. The amount of allowances sold through paid bidding during the pilot period is about 15.8 million tons, with a turnover of 720 million yuan, which accounted for about 80% of the total allowances through paid bidding in all pilot carbon markets. Below is the analysis of the carbon market pricing mechanism piloted in China by taking the Guangdong carbon market as an example. During the pilot period, the pricing mechanism of the Guangdong carbon market has been explored in an all-round way. In the first year after the pilot market was launched, Guangdong adopted a carbon pricing method featuring government-guided prices, and stipulated that all emission control enterprises in the carbon market should compete to buy allowances at set carbon prices (60 yuan per ton). In the second year, the bidding reserve price for paid allocation of allowances was changed from the fixed government-guided price to hierarchically increasing prices. The four bidding reserve prices in 2014 were 25 yuan per ton, 30 yuan per ton, 35 yuan per ton, and 40 yuan per ton, respectively. From September 2014 to June 2015, one open auction

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for allowances was arranged in every last month of each quarter in principle. This hierarchically increasing carbon price sends a strong price message to society: carbon allowances will become increasingly scarce, thus playing a role in keeping market expectations stable. In 2014, the trading volume of allowances in Guangdong’s first carbon market was 3.438 million tons, with a turnover of over 100 million yuan. During the third performance period of the Guangdong pilot market, a mechanism for primary and secondary market price linkage as well as the abortive auction was established. In the first and second performance periods, the bidding reserve prices in the paid allowance allocation system in Guangdong’s carbon market were set by the competent government department, and the primary and secondary markets were not tightly linked. The Guangdong Plan for Paid Allocation of Carbon Emission Allowances in 2015 issued on July 10, 2015 announced that the bidding method for paid distribution was changed. The government-guided price was no longer used as the bidding reserve price, and 80% of the weighted average transaction price of allowances through listed trading on the Guangdong carbon market in the three natural months before the auction announcement date was used as the minimum effective price for paid bidding. For the first time, the carbon pricing method realized the effective linkage between the primary market bidding reserve price and the secondary market price, thus playing the market’s role in pricing function and resource allocation. Following the success of the first policy reserve price and the secondary market price linkage mechanism, the Guangdong bidding mechanism becomes a mature model. The transaction price of 12.69 yuan per ton in the third auction in 2015 also sent an effective signal to the secondary market price (from 16.4 yuan per ton on March 29 to 12 yuan per ton in the last ten days of April), which showed a good market linkage. In 2015, the amount of paid allowances issued was two million tons. In a total of four auctions, the amount of allowances traded was 1.1 million tons, with a transaction value of more than 15 million yuan. Judging from the market reaction, as carbon pricing methods become increasingly mature, there is a convergence between the transaction price trend of the secondary market and changes in the auction price in the primary market, with price consistency of 98.16%. The volatility of carbon price in the secondary market is narrowed and the trading volume is increasing. Guangdong’s pilot carbon market has a more rational and mature carbon pricing mechanism (see Fig. 9.1).

2.5 The Role of Governments and Markets in the Pricing Mechanism of Carbon Markets Governments and markets perform different roles in different stages of carbon pricing mechanisms. Although a market mechanism, the carbon market serves the government’s goals of carbon reduction. In a sense, the carbon market is “created” by the government, which plays an irreplaceable role in the carbon pricing mechanism.

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Fig. 9.1 Trading on Guangdong carbon market under three carbon pricing mechanisms

Generally speaking, when the carbon market is just established, the carbon price set by the government can guide market participants in terms of price, playing the role of a beacon. When there are enough market participants, balanced prices are formed in the market, thereby reflecting the marginal emission reduction cost of society. In this case, the market plays a mainstay role in carbon pricing. In the case of the EU carbon market, in 2005 when the EU carbon market was launched, the authorities primarily negotiated carbon pricing with several large carbon emitters. The government also played the role of the market regulator in the carbon market. When the carbon price is too high or too low, the government intervenes as necessary, so that the carbon price is within a reasonable range. Too high a carbon price will dampen the international competitiveness of enterprises, while too low a carbon price makes it difficult to leverage the role of emission reduction and incentives.

3 A Classic Case of Carbon Tax Pricing Mechanism Pricing “carbon” by means of carbon tax aims to incentivize economic entities to voluntarily reduce carbon emissions through fiscal and tax means. It must comply with the three principles of taxation: mandatory, gratuitous and fixed. All objects of the collection must follow this pricing mechanism. Judging from the countries that levy carbon taxes, carbon taxes are primarily imposed on the carbon emissions of fossil fuels (e.g., gasoline, diesel, coal, and natural gas). Different tax rates are used according to the carbon dioxide emissions of different fuels for the sake of a more reasonable carbon tax. In order to lessen the burden on enterprises, most countries and regions reduce the tax burden of other types of taxes through tax adjustment while levying carbon tax, so as to achieve tax neutrality. The imposition of the

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carbon tax has a wide-ranging and complex impact on a country’s competitiveness and income distribution. It requires economists, sociologists, management scientists, etc. to conduct systematic researches, and make suggestions for the design of the carbon tax pricing mechanism after thorough assessment. This deserves serious consideration when a country formulates carbon tax policies. So far, many countries in the world levy carbon taxes, and have amassed rich experience, and learned lessons from failure. Below is a systematic introduction to the carbon tax as an emission reduction pricing mechanism through typical cases.

3.1 An Overview of the World’s Major Carbon Tax Policies Carbon pricing mechanism such as the carbon tax is implemented in many countries in the world. Since Finland introduced carbon tax in 1990, carbon tax has gone through different stages of development. From the perspective of the existing carbon tax system, it falls into two categories: separate tax system and proposed tax system. The separate tax system refers to the carbon tax separately proposed as a clearly defined tax category. The separate tax system is implemented in the countries represented by Finland, Sweden, Norway, Denmark and the Netherlands. These are also the world’s first five countries to introduce carbon tax. Under the proposed tax system, the carbon tax is not proposed as a separate tax category, but it introduces carbon emission factors into the taxation basis of the existing tax categories to form a potential carbon tax. Britain is a representative in this regard. Since the EU carbon market was established in 2005, the carbon tax is no longer the only emission reduction pricing mechanism. It coexists with the carbon market pricing mechanism. Countries that have implemented and plan to implement carbon emission control have the choice of the two emission reduction pricing mechanisms. Coordinated use of carbon tax and carbon market as two emission reduction mechanisms is becoming a prevailing trend. The separate tax system, the proposed tax system, as well as the carbon tax and carbon market’s linkage emission reduction pricing mechanism are introduced below through country-specific cases. Finland is the first country in the world to introduce a separate carbon tax, making it a mature and representative country in this regard. Since the British carbon tax belongs to the proposed tax system, and it also implements the carbon tax and carbon market’s linkage emission reduction pricing mechanism, the proposed tax system and linkage emission reduction pricing mechanism will be introduced based on the example of Britain’s carbon tax. Australia’s checkered experience in implementing and abolishing carbon tax is of reference significance. The main reasons for the abolition of Australia’s carbon tax are introduced and analyzed below.

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3.2 Finland’s Separate Carbon Tax Pricing Mechanism Finland is the first country in the world to introduce a separate carbon tax. In order to promote implementation, Finland’s carbon tax system is characterized by a low tax rate and narrow tax scope. Finland’s carbon tax system has been reformed three times since it was introduced in 1990, and its experience deserves our learning. Finland’s carbon tax is levied on carbon dioxide released from the combustion of energy products such as coal, gasoline, diesel, light and heavy fuel oil, and natural gas. As the carbon tax system is improved, the scope of tax is expanding. In addition to the above energy products, it also covers aviation kerosene, aviation gasoline, some biofuels, etc. It uses a system in which the carbon tax is assessed based on carbon dioxide emissions released during the combustion of energy products. It adopts the fixed tax rate (non-progressive tax rate), but the tax rate is increased year by year, from about 1.2 euros per ton in 1990 to the current 20 euros per ton. Different tax rates apply to different energy varieties, with preferential policies on tax returns to varying degrees being implemented. In 1990, the Finnish government began levying a carbon tax of US$1.62 per ton on fossil fuels based on carbon content. Since there had already been an energy tax on fuels for transportation in Finland before the carbon tax was introduced, the carbon tax was initially levied on fossil fuels except for fuels transportation, so as to avoid double taxation. At the same time, the energy tax and carbon tax were levied at a ratio of 2:3 under the mixed energy-carbon tax system. After it was put into practice, it was found that the mixed tax system has drawbacks such as complex operations and varying standards. Therefore, Finland conducted carbon tax reform to abolish the mixed tax system, while retaining the carbon tax only. In 1997, the Finnish preferred the single carbon tax to the mixed tax system, and the taxation basis is the carbon dioxide equivalent released during the combustion of fossil fuels. The implementation of the carbon tax in Finland coincided with the opening of the Nordic electricity market. Finnish power companies were at a competitive disadvantage because other Nordic countries exempted energy-intensive companies from the carbon tax. In response, the Finnish government also tried to exempt its domestic energy-intensive enterprises from the carbon tax. Since 1998, Finland introduced additional high tax rebates for energy-intensive industries: Industrial enterprises of a certain scale that were identified as belonging to the energy-intensive industries by the Finnish government receive 85% of the energy tax paid as a tax rebate. The energy-intensive industries identified by the Finnish government refer to the industries in which energy consumption tax payable by industrial enterprises accounts for over 3.7% of the added value of industrial enterprises, excluding motor vehicle fuel tax and tax subsidies. A certain scale refers to the tax payable by industrial enterprises exceeding 51,000 euros. Under this criterion, only 12 companies received this tax rebate in 1999, with a total amount of 14.3 million euros. These enterprises mainly belonged to the papermaking industry. However, it is noteworthy that these 12 enterprises accounted for more than 90% of the total output value of the papermaking industry in the country.

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Finland’s carbon tax system has gradually matured after several carbon tax reforms. First, the scope of taxation is expanding. Second, to increase the proportion of new energy in energy consumption, the carbon tax rate for various fuel categories has been increased since 1994. Third, to soften the negative impact of the carbon tax on the economy, it complies with the principle of income neutrality, and adopts supporting preferential policies such as tax relief or refunds for taxpayers. The carbon tax is considered one of the most key means for Finland to build a low-carbon economy. In February 2020, the Finnish government announced a plan to be the first in the world to become carbon neutral by 2035.

3.3 The Joint Emission Reduction Pricing Mechanism of Carbon Tax + Carbon Market in the UK The UK is one of the first countries to attach importance to greenhouse gas emissions control, and introduced the Climate Change Levy (CCL) in 2001. Starting in 2001, all industries, commerce and public sectors in the UK are required to pay CCL based on their consumption of high-carbon energy sources such as coal, oil and gas and electricity. Tax relief is granted if bioenergy, clean energy or renewable energy are used. CCL is a carbon tax in the broad sense, and their taxation base is linked to energy use, not to greenhouse gas emissions. Therefore, it is not a carbon tax in the strict sense. At the same time, there are two pricing mechanisms in the UK carbon market: the UK ETS and the EU ETS. The UK Emissions Trading Mechanism (UK ETS) was launched in 2002 as part of the UK Government’s action plan to tackle climate change. The EU Emissions Trading System (EU ETS) was officially launched on January 1, 2005, and the UK is also covered by the EU ETS. There are some differences between the two mechanisms. British enterprises must participate in the EU ETS but can choose to participate in the UK ETS. However, in order that the two systems operate in harmony, the EU stipulates that enterprises that participate in the UK ETS can temporarily opt out of the EU ETS in the first phase (2005–2007), but must fulfill the obligations of the UK ETS.3 As the carbon market pricing mechanism for EU ETS is introduced in the second part of this chapter, it is not elaborated here. The UK grants carbon tax relief to enterprises participating in the carbon market. In 2011, the British government announced plans to introduce a carbon price floor mechanism in April 2013 primarily because of the failure of the EU ETS to regulate carbon emissions. According to the UK’s Electricity Market Reform (EMR) White Paper (2011), “Given the unstable and low trading price of carbon emission in the current carbon market, it is not enough to incentivize British investment in lowcarbon power generation”, and it is also not conducive to the realization of the UK’s target of reducing carbon emissions by 80% on the basis of the 1990 level by 2050. To provide stronger and more lasting incentives, the British government established 3

Wang Wenjun (2009), Ren Yayun and Fu Jingyan (2019), Zhuang Guiyang (2021), Zhou Hongchun (2021).

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a carbon price floor mechanism whereby British power generation companies pay for carbon emission allowances. The carbon price floor in 2013 was £15.70. The price gradually increased by around £2 per year, reaching £30 in 2020. It then increases by around £4 per year until it will reach £70 by 2030 (all prices are set based on the 2009 level). On April 1, 2013, the carbon price floor (CPF) came into effect. It is equivalent to levying a tax on fossil fuels used by power generation companies. Since CCL has been imposed on fossil fuels used by power generation companies, it is necessary to set a new carbon price support ratio for CCL. According to the regulations, the CPS was up to £18 per ton from FY2016/2017 to FY2019/2020. The implementation of the carbon pricing mechanism has a big impact on the production costs in the energy and high-carbon sectors. In order to soften the cost impact and help the high-carbon industry to achieve a low-carbon transition, the UK has set up the Carbon Fund, a government-invested commercial fund that operates on a business model. The Carbon Fund has clear short-term goals and longer-term plans. The short-term goals are to improve energy efficiency and tighten carbon management, and the longer-term goals are to invest in low-carbon technologies. The targets of investment are large-scale energy-intensive enterprises with annual energy consumption costs of three million to four million pounds or above. The main source of funding for the Carbon Fund is the UK’s CCL, which allocates about £66 million a year to the Carbon Fund.

3.4 Australia’s Carbon Tax Pricing Mechanism Australia launched a carbon price mechanism in 2012, which was revoked in 2014. Australia’s carbon tax bill was announced on July 10, 2011 by the Australian government when Julia Gillard of the Australian Labor Party served as the Prime Minister. It was passed by Parliament on November 8, 2011 and formally implemented on July 1, 2012. According to the Carbon Tax Bill, Australia’s 500 largest energy groups have to pay the carbon tax, accounting for more than 60% of Australia’s carbon emissions. About one tenth of these companies are primarily engaged in electricity generation, and one-fifth are primarily engaged in coal mining, steelmaking as well as the extraction of high-carbon products. In terms of taxation standards, Australia sets two tax rates: with 2015 as the dividing line, a fixed tax rate is implemented in the first three years. The basis of taxation is AU$23 per ton from 2012 to 2013, AU$24.15 per ton from 2013 to 2014, and AU$24.50 per ton from 2014 to 2015. The carbon price is the government-guided price. After 2015, the carbon tax system was gradually replaced by the carbon market system, and the market pricing strategy was implemented. Due to opposition from enterprises, the Rudd government announced in July 2013 that it would abolish the carbon tax. On September 8, 2013, Tony Abbott, the newly elected Prime Minister of Australia, said that the carbon tax bill would increase the production costs of enterprises as well as the cost of living for ordinary people, which would slow down Australia’s economic development and reduce jobs. Moreover, the

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carbon tax could not reduce carbon emissions in a real sense. It required drafting a scheme to abolish the carbon tax. On November 21, 2013, the Australian House of Representatives formally adopted the Carbon Tax Repeal Bill proposed by the Liberal/National coalition government. After the carbon tax repeal bill was passed by the House of Representatives, it must be submitted to the Senate for voting. In July 2014, the Senate of the Australian Parliament passed a series of bills to repeal carbon taxes, making Australia the first country in the world to revoke carbon tax. Australia abolished the carbon tax to reduce the cost of electricity and natural gas used by households and industries. Some analysts believed that Australia did not conduct a comprehensive cost–benefit analysis before introducing the carbon tax. Coupled with mixed public and political opinions, as well as vehement opposition from the manufacturing and commercial sectors, the policy was repealed after only two years of implementation.

3.5 Several Key Points for a Successful Carbon Tax Pricing Mechanism The carbon tax pricing mechanism originated from environmental tax. It was introduced earlier than the carbon market pricing mechanism, with more advantages in terms of the institutional environment and social acceptance. Instead of controlling the total carbon emissions, carbon tax promotes emitters to proactively control carbon emissions through the price mechanism. Compared to the carbon market pricing mechanism, it is easy to understand and easy to operate. Judging from the practices of the carbon tax pricing mechanisms in the aforesaid countries, the following key elements are essential for leveraging the role of the carbon tax emission reduction pricing mechanism, whether it be the separate carbon tax or the proposed tax system. (1) Setting of the tax base. Theoretically, the base of the carbon tax should include carbon dioxide and other greenhouse gases. In practice, however, it is difficult and costly to measure the carbon emissions of an activity. Especially when there are many sources of carbon emissions from such an activity, the feasibility of measurement is basically nonexistent. Therefore, governments focus on the carbon content of energy products directly associated with carbon emissions activities as an approximate alternative to carbon emissions when introducing a carbon tax. (2) Targets of tax collection. Most countries primarily levy tax on energy producers and high-carbon industries, with less tax on the consumption of energy products, because levying tax “upstream” is less costly and technically complex than levying tax “downstream”. Moreover, industries that are open wider to the outside world face stiffer international competition. If the tax burden level of carbon taxes at home and abroad is unequal, a carbon tax will lower the international competitiveness of domestic industries, but if a carbon tax is not levied

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on these industries, it works against a low-carbon transition. A usual international practice is to only levy tax on “upstream” enterprises without refund, but implement “refund after collection” for “downstream” enterprises. Therefore, all energy-intensive enterprises with high emissions should be included in the scope of carbon tax collection, but supporting preferential tax policies should be implemented, which promotes a low-carbon transition while protecting the international competitiveness of domestic industries. (3) Setting of the tax rate. A usual international approach adopts the model of setting a relatively low tax rate to begin with and then gradually increasing the tax rate over time. This allows a process of adaptation for enterprises while also reducing the political pressure on the implementation of carbon tax policies. If the opposite is conducted, it will meet huge social resistance. For example, the Danish government took a “one-step” approach to setting the tax rate, and as a result the carbon tax scheme could not be introduced. (4) Use of carbon tax revenue. Currently, governments that levy carbon taxes use carbon tax revenues to compensate for the decline in revenues from other tax reductions. The theoretical basis of this approach is the “double-dividend” theory of environmental tax. If environmental taxes are used to compensate for a decline in distorting taxes, it can promote job creation and social investment while protecting the environment, so that the tax system operates more efficiently. In view of the possible improper allocation of funds caused by the targeted use of tax revenues, or increased risks of rent-seeking by interest groups, as well as the obstacles to tax reform resulting from entrenched practices, most experts recommend that a portion of the carbon tax revenue should be used in a targeted manner.

4 Outlook of Carbon Pricing Mechanism as China Moves Towards Carbon Peaking and Carbon Neutrality Global efforts are underway to reduce greenhouse gas emissions, as evidenced by the Kyoto Protocol and the Paris Agreement. The carbon pricing mechanism is being implemented globally. As the pressure of emission reductions increases, and the emission reduction campaign and policies advance, the carbon pricing mechanism is gradually shifting from the separate carbon tax to joint carbon tax and carbon market pricing. More and more countries are moving towards a joint carbon pricing mechanism. China has amassed 10 years of experience in piloting the carbon emission trading mechanism. On July 16, 2021, the national carbon market was officially launched online, starting with the power generation industry. It covers more than 2000 key emission enterprises, which cause more than four billion tons of carbon emissions. The average transaction price on the first trading day was 51.23 yuan per ton, and the transaction volume was 4.104 million tons, with a turnover of over

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210 million yuan.4 The booming carbon market shows that this pricing mechanism is in line with China’s reality. While promoting enterprises to implement a carbon reduction campaign, it reduces the costs of emission reduction, so that the carbon market is recognized in society. According to the Working Guidance for Carbon Peaking and Carbon Neutrality in Full and Faithful Implementation of the New Development Philosophy issued by the CPC Central Committee and the State Council, gradually expanding the coverage of the carbon market and better managing the allocation of allowances are key tasks of moving faster to build and improve the national carbon emission trading market. During the “Fourteenth Five-Year Plan” period, the remaining high-energy-consuming industries such as steel, non-ferrous metals, petrochemicals, chemical engineering, building materials, paper production, electricity, and aviation are likely to be fully incorporated into the national carbon trading market. In recent years, there has been a groundswell of opinion for “carbon market + carbon tax”. The Action Plan for Carbon Dioxide Peaking Before 2030 issued by the State Council also proposes establishing a sound tax policy system conducive to green and low-carbon development, and leveraging the role of tax in promoting market players to pursue green and low-carbon development. Below is the discussion on several key points of the joint carbon pricing mechanism, as well as the outlook of the development of the carbon pricing mechanism in China during the progression from carbon peaking to carbon neutrality.

4.1 The Carbon Market is Strong Support for China to Achieve the “Dual Carbon” Goals The progress from the pilot establishment of the carbon market in regions to the formal implementation nationwide in China sends a clear price signal. It is a prevailing trend to tighten carbon emission management and pursue low-carbon development. According to the over ten years’ observation of the pilot operation of the carbon market by the government, the carbon market pricing mechanism is in line with China’s reality. During the pilot operation period, it played an excellent role in reducing the cost of emission reduction for enterprises, facilitating energysaving renovations, and raising public awareness of low-carbon development. For example, in the first year of the pilot program (2013), the carbon emissions by industrial enterprises in Shanghai included in the carbon market decreased by 5.317 million tons, down by 3.5%, compared with 2011. The proportion of coal consumption fell to 62.3%, and that of natural gas rose to 11.1%. The carbon emissions of carbon trading enterprises in the electric power and heat industry, petrochemical engineering and steel industry in 2019 fell by 8.7%, 12.6% and 14% respectively. According to the data from the annual summary of the Guangdong carbon market, more than 80% of emission control enterprises in Guangdong Province implemented 4

“National carbon market got off to a flying start, with a turnover of 210 million yuan on the first day,” website of Central People’s Government of the People’s Republic of China, July 16, 2021.

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technology transformation for energy saving and emission reduction, and more than 50% reduced their carbon intensity. The carbon market also plays a role in concerted and coordinated emission reduction. While reducing carbon dioxide emissions, it also suppresses sulfur dioxide emissions to contribute to a better environment. It is foreseeable that as the national carbon market becomes operative and the carbon market pricing mechanism improves, the carbon market pricing mechanism will be used as a principal market instrument to support the realization of the “dual carbon” goals.

4.2 Carbon Peaking and Carbon Neutrality Raise Higher Demands for the Carbon Pricing Mechanism There is only an interval of about 30 years for China to move from carbon peaking to carbon neutrality. To reduce the emissions of almost all carbon emission sources to nearly zero in a short time, it is necessary to carry out comprehensive carbon emission management. Judging from the operation of carbon markets at home and abroad, carbon markets only cover part of the carbon emissions in the economic industries, rather than all carbon sources, because the carbon market has special requirements for the targets of management. Only industries with relatively simple processes where carbon emission data can be easily collected, monitored and verified are suitable for entering the carbon market. If the carbon market pricing mechanism is implemented in all industries, there are high regulatory costs and moral hazards. The Administrative Measures for Carbon Emissions Trading (Trial), issued by the Ministry of Ecology and Environment on December 25, 2020 and implemented as from February 1, 2021, stipulate that only key carbon emitters whose annual greenhouse gas emissions reach 26,000 tons of carbon dioxide equivalent can enter the national carbon market, and those that fail to reach this criterion for two consecutive years will be removed from the national carbon market. This means that carbon emissions from a wealth of small and medium-sized carbon sources are not covered by the carbon pricing mechanism. As a result, the mechanism is resisted by enterprises that are covered by the carbon pricing mechanism, particularly those that pay for excess emissions, because they incur higher production costs and are less competitive compared with their peers that are not on the carbon market. The issue of how to incorporate emission sources outside the carbon market into the carbon pricing mechanism concerns the rapid decline in the total carbon emissions and the fair management of the carbon pricing mechanism. China must address this issue as it progresses from carbon peaking to carbon neutrality.

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4.3 The Joint Carbon Pricing Mechanism is Becoming the International Mainstream From a practical viewpoint, it is often difficult to achieve the expected effect of emission reductions through a single carbon emission reduction policy. The national emission reduction targets may only be achieved through the combined effect of many emission reduction policies. For example, the Swiss government sets emission reduction targets for enterprises in high-carbon (highly polluting, energy-intensive, high emissions) industries such as cement, glass, pulp and papermaking, and stipulates that if these enterprises exceed their emission reduction allowances, they must purchase allowances in domestic and foreign markets. Otherwise, it must pay the carbon tax. Carbon dioxide emissions covered by Norway’s carbon tax account for 68% of the country’s total carbon emissions, and the carbon emissions by companies participating in EU ETS account for 35% to 40% of the country’s total. Similarly, the British government has also introduced the carbon price floor mechanism: when the carbon trading price is lower than the minimum value set by the government, it will levy the CCL to make up the difference. This approach ensures that enterprises can make flexible decisions for emission reduction while achieving the established carbon emission reduction targets. The two pricing mechanisms of the carbon market and carbon tax have their respective advantages in terms of cost, efficiency, objects of management, etc. The two pricing mechanisms complement to cover carbon emission control in the whole society, thus solving the issue of unfairness caused by the partial coverage of carbon markets.

4.4 China is Eligible for the Joint Implementation of Two Pricing Mechanisms Back in 2006, China began to conduct study and discussion on the necessity and feasibility of carbon tax, the design of the tax system, etc. After nearly seven years of demonstration, the Ministry of Finance completed the Environmental Protection Tax Law of the People’s Republic of China (Draft for Review) in March 2013, which proposes replacing the pollution charges with environmental protection tax and imposing environmental protection tax on carbon dioxide. Due to the sharp disagreement in the industry over whether carbon dioxide is an environmental pollutant, carbon dioxide was not classified as a taxable pollutant in the Environmental Protection Tax Law of the People’s Republic of China, which was deliberated and adopted in December 2016 and entered into force in 2018. In light of China’s reality and out of consideration for international alignment and participation in international climate cooperation, the carbon market is selected as a starting area for the implementation of the carbon pricing mechanism, and the carbon market was first piloted in seven regions, with good results achieved. Especially in terms of the carbon pricing mechanism, rich practical experience has been gained. The national carbon market

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will be launched in 2021. Some research institutions predicted that the national carbon market can only cover 50% of China’s carbon emissions. How to manage carbon emission sources outside the carbon market is a practical problem for the government. It is difficult to achieve the “dual carbon” goals through carbon trading alone. The two-pronged approach may be the ultimate solution.

4.5 Implementing Two Pricing Mechanisms in Stages is the Shape of Things to Come China set the ambitious goals of achieving carbon peaking by 2030 and striving to achieve carbon neutrality by 2060, which actually gives a carbon budget. With a dwindling carbon budget, implementing the pricing mechanisms of the carbon tax and carbon market for emission reduction is the mainstream policy response to climate change in the world. From the perspective of international experience, more and more countries implement the “carbon tax + carbon market” joint management model, incorporating the carbon tax emission reduction pricing mechanism into the scope of environmental protection tax reform, or enacting a separate law for the carbon tax. Carbon tax and carbon market are implemented in parallel for the classified management of carbon emission sources in society. China launched the national carbon market in 2021, starting with the electric power industry. Textile, petrochemical engineering, steel and other industries will be incorporated in the future. Judging from the Administrative Measures for Carbon Emissions Trading (Trial) issued by the Ministry of Ecology and Environment, the key emitters controlled by the carbon market are enterprises or other economic organizations whose annual greenhouse gas emissions in the industries covered by the national carbon emission trading market reach 26,000 tons of carbon dioxide equivalent (comprehensive energy consumption of about 10,000 tons of standard coal) or above. An optional policy is to manage sources of carbon emissions outside the carbon market in the form of a carbon tax. Many scholars call for the adoption of a carbon market and carbon tax to jointly manage carbon emissions in support of China’s “dual carbon” goals. China’s environmental protection tax law has been reformed, and it is inadvisable to make hasty changes. The most feasible way to levy carbon tax is to introduce a separate law. Regardless of the form of levying the carbon tax, the issue of how carbon taxes and carbon market mechanisms are implemented in parallel must be addressed.

4.5.1

The Positioning of the Two Mechanisms Should Be Clear

When the scope of the carbon market is clear, it is important to clarify the purpose of the carbon tax—to play the role of carbon price floor support (such as in Britain)

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or to regulate carbon emissions not covered by the carbon market. If the carbon tax is primarily to serve as the carbon price floor support, the coverage of the two mechanisms can overlap. If the carbon tax and the carbon market mechanism jointly regulate the total carbon emissions of society, the coverage of the two mechanisms should not overlap.

4.5.2

Selection of Objects of Management

According to some studies, a carbon market mechanism is suitable for managing enterprises with a small potential for emission reduction. It helps reduce the emission reduction costs of enterprises by purchasing allowances below the marginal emission reduction costs on the market to obtain the carbon emission permits required for industrial development. It is suitable to adopt the carbon tax mechanism for enterprises with large potential for emission reductions, because the role of price prompts enterprises to reduce emissions on their own initiative.

4.5.3

Carbon Tax Rates Should Echo Carbon Prices on Carbon Markets

Going by the successful experience of foreign countries, the tax rate of the separate carbon tax generally increases upwards. In particular, at the beginning of the tax collection, the tax rate should be kept at a low level. Otherwise, it is likely to meet public resistance. If China implements the “carbon tax + carbon market” joint pricing mechanism, it should consider designing a mechanism linked to carbon prices in the carbon market when setting the carbon tax rate. Otherwise, it may distort the price signal and cause new unfairness.

4.5.4

Coordinated Management of Carbon Tax and Carbon Market Revenue

Judging from the current situation, the income from the paid allocation of carbon market allowances enters the national treasury for monopolized revenue and expenditure, and there is insufficient financial support for the low-carbon transition of high-emission enterprises. The carbon tax revenue will also face this problem. It is recommended to set up a carbon fund or open a special account with the financial department for the dedicated management of revenue from the carbon tax and the carbon market. It is used to promote the low-carbon transition of enterprises without unduly damaging the competitiveness of enterprises.

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Gain Public Understanding and Support

The failure of Australia’s radical reform of carbon tax, and the failure of the Danish program caused by the public resistance to the “one-step” tax rate are all cautionary stories for China about the need to prudently deal with the carbon tax issue. In particular, China has launched carbon markets. Before introducing the carbon tax, we must inform the public of the coverage and implementation requirements of the two mechanisms, so as to secure public support and understanding. Full discussion and solicitation of opinions should be conducted in society before introducing the tax. Moreover, the pre-notice system and a step-by-step implementation strategy should be implemented.

References Zhuang Guiyang, “Realization Path of Emission Peak Goal and Carbon Neutrality Vision”, Shanghai Energy Conservation, No. 6, 2021. Zhou Hongchun, “Promote Pollution and Carbon Emissions Reduction on the Basis of Carbon Neutrality Indicators”, China Development Observation, No. 1, 2021. Zhang Ke, “Ministry of Environment: China’s Carbon Market Has Become the Second Largest Carbon Market in the World in Terms of Allowance Volume,” yicai.com, September 25, 2020. Wang Wenjun, “The UK’s Policy on Climate Change Response and Its Reference Value”, Contemporary International Relations, No. 9, 2009. Ren Yayun and Fu Jingyan, “Research on the Emission Reduction and Green Development Effects of Carbon Trading”, China Population Resources and Environment, No. 5, 2019.

Chapter 10

Urban Leadership in Carbon Peaking and Carbon Neutrality Zhuang Guiyang and Wei Mingxin

Cities are a key space and actor to promote the transition to a low-carbon economy as well as high-quality economic and social development. China has always attached great importance to the initiative and creativity of cities in the effort to achieve climate action goals. The National Development and Reform Commission has piloted the low-carbon city program three times in 2010, with good results achieved. For the “dual carbon” goals, cities, as the “pioneers”, will enjoy a strategic window period for green transition with increasing policy support. Under the rigid constraint of carbon emissions, cities will move faster to explore a win-win path of emission reduction and economic growth, build confidence to achieve the “dual carbon” goals, endeavor to set an example in carbon neutrality, and better play the role in helping to achieve the “dual carbon” goals as low-carbon cities.

1 It Is Important for Cities to Achieve the “Dual Carbon” Goals Cities are the primary gathering places where people work and live, and are a key starting area and basic actor for policy implementation. Since the 18th CPC National Congress, General Secretary Xi Jinping has given many important viewpoints on how to promote urban construction, and answered the key issue of how to “pursue a path of urban development with Chinese characteristics”. The building of low-carbon Z. Guiyang (B) Research Institute for Eco-civilization, Chinese Academy of Social Sciences, Beijing, China e-mail: [email protected] W. Mingxin Department of Ecological Civilization Studies, University of Chinese Academy of Social Sciences, Beijing, China e-mail: [email protected] © China Financial & Economic Publishing House 2023 G. Zhuang and H. Zhou (eds.), China’s Road to Carbon Peaking and Carbon Neutrality, https://doi.org/10.1007/978-981-99-3122-4_10

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cities should be guided by Xi Jinping’s Thought on Ecological Civilization, the basic requirement for achieving quality economic development, and the achievement of the “dual carbon” goals in regions and the whole country. Efforts will be made to make the low-carbon economy in China’s urban areas more innovative, competitive and sustainable.

1.1 Promote Urban Construction with Xi Jinping’s Thought on Ecological Civilization General Secretary Xi Jinping has always placed a high value on urban construction, having repeatedly called for upholding the idea of “lucid waters and lush mountains are invaluable assets” in urban development, and applying the concept of harmonious coexistence between man and nature into urban construction. In 2015, General Secretary Xi Jinping said at the Central Urban Work Conference that mountains, rivers, forests as well as farmlands, and lakes are an organic component of the urban entity and must not be encroached upon and damaged at will. This was recognized by the Chinese ancients more than 2000 years ago. According to Guanzi, “The sages built their capitals in regions with flat terrain, stable geology, fertile soil and bountiful products. Backed by the mountains, it has rivers or lakes on the left and right, which provide a steady supply of water.” In fact, some of our beautiful cities where man and nature are in harmony have been built under the guidance of this concept.1 In essence, the overall idea of urban construction regards the city and nature as a whole, and mountains, rivers, forests, farmlands, lakes, and grasslands as an organic part of the urban entity, so as to avoid turning the city into “an airtight cement board”. In 2013, General Secretary Xi Jinping said at the Central Urbanization Work Conference that we should fuse the city into nature, instead of going to great lengths to blast mountains and reclaim the sea. Many mountain cities and canal cities have distinctive characteristics. We can take advantage of the unique scenery like the existing landscape, so that residents can see the mountains and rivers, and preserve a touch of nostalgia.2 By integrating the city into nature and getting back to nature, we can better balance work, life and ecology in cities, and ensure that the space for production is used intensively and efficiently, that the living space is livable and proper in size, and that the ecological space is unspoiled and beautiful. This dovetails with the inherent requirement of carbon neutrality. Regarding the path of urbanization, General Secretary Xi Jinping has repeatedly said that more prominence should be given to promoting ecological progress, urban construction should be people-centered, and intensive, green, and high-quality development with rich connotations should be promoted. In April 2020, General Secretary Xi Jinping said at the seventh meeting of the Central Committee for Financial and Economic Affairs that we should formulate urban development plans under the 1 2

CPC Central Committee Literature Research Office (2017). CPC Central Committee Literature Research Office (2014).

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guidance of thinking on promoting ecological progress and a holistic approach to national security, build livable cities, resilient cities, and smart cities, and establish high-quality urban ecosystems and safety systems.3 In November 2020, General Secretary Xi Jinping stressed on a tour of inspection in Jiangsu that we should give more prominence to the protection of the urban ecological environment, scientifically and rationally plan the urban space for work, living and ecological protection, and balance urban work and life with ecological environmental protection. We should improve both the quality of economic development and the quality of people’s lives.4 General Secretary Xi Jinping’s forward-looking and holistic view on the development of cities with Chinese characteristics has laid a key theoretical foundation for promoting a pattern of low-carbon urban transformation at the new development stage.

1.2 The Key Role of Cities in Achieving the “Dual Carbon” Goals 1.2.1

Cities Are the Principal Region for Low-Carbon Development and Emissions Reduction

Cities are the principal gathering places where people work and live, as well as the main sources of energy consumption and carbon dioxide emissions. According to a 2015 report by the Intergovernmental Panel on Climate Change (IPCC), cities account for over 65% of energy consumption and over 70% of energy-related carbon emissions worldwide. The urban expansion will continue. According to the 2018 Revision of World Urbanization Prospects released by the UN, the urban land worldwide expands faster than the growth rate of the urban population. By 2030, the global urban land will be expected to be more than three times that in 2020. The improper planning and management of urban construction is likely to result in eco-environmental problems. According to the general law of urbanization, the road network expands, private car ownership increases, demand for buildings and electricity supply grows, and infrastructure intensity increases at the stage of rapid urbanization. The demand for new buildings decreases in the mature stage of urbanization, but energy consumption and carbon emissions caused by the use of the existing infrastructure will stay at a high level, and the carbon emissions from the transportation and postal industries will increase. China is still at a stage with an urbanization rate of 30 to 70%. By 2030 and 2050, China’s urbanization rate will reach about 70% and 80% respectively. It is important to design differentiated emission reduction strategies in different development stages of Chinese cities. 3

Xi Jinping (2020). “Xi Jinping stresses applying a new vision of development, building a new development pattern, and promoting quality, sustainable economic and social development on a tour of inspection in Jiangsu”, People’s Daily, November 15, 2020.

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Cities Are the “Pillar” to Achieve the “Dual Carbon” Goals

First, the policy framework for carbon peaking gradually becomes clear, and lowcarbon cities will play a demonstrative role in the context of “rigid constraints”. The 2021 Report on the Work of the Government lists “making solid progress in carbon peaking and carbon neutrality” as the priority work, and requires “formulating an action plan for carbon peaking by 2030”. In this context, the relevant ministries and commissions require all local governments to formulate and promulgate action plans for carbon peaking in light of local conditions. The Ministry of Ecology and Environment announced that the achievements of work on carbon peaking will be subject to central government inspections on environmental protection. This means that all local governments will study, formulate and enforce the timetable and roadmap for carbon peaking. According to the Working Guidance for Carbon Dioxide Peaking and Carbon Neutrality in Full and Faithful Implementation of the New Development Philosophy issued by the CPC Central Committee and the State Council, improving the quality of green and low-carbon development in urban and rural construction is listed as one of the main tasks in 10 areas. It also pointed out the need to promote the low-carbon transition for urban and rural construction as well as management models. As a “pioneer”, cities should move faster to explore a win-win path of emission reduction and economic growth, build confidence to achieve the “dual carbon” goals, and endeavor to set an example in carbon neutrality. Second, the policy support for carbon peaking is increasing, and low-carbon cities enjoy a strategic window period for a green transition. At the administrative level, all local governments will prepare special plans as well as the schemes for carbon peaking and carbon neutrality, and promote a low-carbon transition in key areas such as electric power, construction, and transportation sectors. At the market level, the national carbon emissions trading market has been launched, with the carbon emission pricing mechanism being continuously improved. In terms of other areas, the “dual carbon” goals are bringing about a thorough change in the industry, technologies, business models as well as the concept of environmental protection in society. This will form a policy synergy for green development and change the sole role of the government in the building of low-carbon cities. Third, the policy on the pilot program of low-carbon development has been explored and experiences summarized, and its beneficial practices are expected to be applied more extensively. The pilot program generally includes a “pilot scheme” and “popularizing experience”. The process of “pilot scheme-diffusion” of policy is essentially a process of policy innovation and diffusion in China. Three batches of low-carbon cities are piloted under this policy logic. The significance of the pilot program is to identify and solve problems, and gain experience. Judging from the results of the assessment of the pilot low-carbon cities, the pilot cities have made achievements in energy saving and emission reduction, cleared the way for policy implementation, and also exposed problems in the goal setting, replacement of drivers, etc. The pilot program of low-carbon cities in the context of “dual carbon” goals will become a powerful policy tool, and the experience accumulated will provide a useful reference for other cities.

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2 Experience and Inspiration for the Pilot Program of Low-Carbon Cities Since the National Development and Reform Commission launched the first pilot program of low-carbon cities in July 2010, a total of 87 provinces, municipalities and counties have been involved in the three pilot programs. The content of the pilot program and thinking has become clearer. In terms of the scale, the pilot program gradually covers second-, third- and fourth-tier cities at the municipal levels, including economically developed areas, areas for eco-environmental protection, resource-depleted areas, old industrial bases, and other types. In terms of the design of pilot policies, the content, objectives and tasks of the pilot program are clearer, the requirements are more specific, and supporting policies such as monitoring and evaluation are being improved. According to a comparative study of pilot low-carbon cities and similar regions in terms of emission reduction performance, it is found that the pilot program has improved the awareness and capacity of pilot cities for low-carbon development, and explored many innovative measures and practices. In particular, the carbon dioxide emissions per unit of GDP in low-carbon pilot cities are reduced faster than that in non-pilot areas, and its reduction is significantly higher than the national average carbon intensity reduction.

2.1 Policy Attributes of Pilot Low-Carbon Cities Judging from policy attributes, the three pilot programs are exploratory and pioneering, with consideration to the comprehensive and professional characteristics. It is a pilot program authorized by the central government and independently driven by local governments. Compared with other pilot programs in the economic field, the pilot program of the low-carbon city is characterized by weak incentives and weak constraints. The first is exploratory and pioneering. As China became the world’s largest carbon emitter in 2006, China faces dramatically increasing international pressure to reduce carbon emissions. As the carbon emission situation worsens, China raises its awareness of responsibility for emission reduction and has formulated a slew of countermeasures, but many people in China are worried that it will negatively affect China’s economic development. Therefore, the pilot program of low-carbon provinces and low-carbon cities launched by the Chinese government will mobilize the initiative of all parties and explore both emission reduction and economic growth. The second is comprehensive and professional. The pilot program of the low-carbon city is a comprehensive undertaking involving changes in the ways of work and living. It requires collaboration among various sectors such as industry, agriculture, energy and electricity, waste management, construction, transportation, and life, and the fulfillment of responsibility by the government, enterprises and the public. At the same time, the pilot program of the low-carbon city is a professional, technical and forward-looking public policy. Professional expertise is necessary for

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the accounting methods of greenhouse gas emissions, the choice of carbon pricing methods, the design of rules for carbon markets, the evaluation of carbon reduction effects, and so on. The third is authorized and independent. The State Council authorized the National Development and Reform Commission to launch the pilot program of the low-carbon cities, because local governments show initiative to implement China’s action objectives for controlling greenhouse gas emissions in 2020. Local governments have the latitude in exploring solutions to problems in light of respective conditions, and then apply successful experiences to national policies, which can be promoted nationwide. The fourth is the weak incentive and weak constraint. On the one hand, the state only requires and encourages pilot low-carbon cities to set strict policy targets in light of the national goals, such as setting carbon peaking goal, but there is no financial and policy support. As a result, pilot cities cannot expand local fiscal resources through market innovation. On the other hand, the state implements the pilot program of the low-carbon cities without providing sufficient mandatory constraints for local governments. Unlike the top-down strong confinement mechanism, this cannot put assessment pressure on local government officials through performance evaluation, project review meetings, etc. As a result, it is impossible to improve the competence of local officials in terms of performance.

2.2 The Relationship Between Central and Local Governments in the Pilot Program Pilot policy implementation plays a key role in promoting China’s policy and institutional innovation. Generally, because the pilot program of the low-carbon city is of an exploratory and tentative nature, local governments are allowed to “cross the river by feeling the stones” in light of the local situation. In other words, the pilot program of the low-carbon city aims to bring about “bottom-up” policy innovations. The central government actively encourages policy innovation based on local conditions. At the same time, local governments have the independent decision-making power to some extent. At present, the pilot program of low-carbon city is a program in which “the central government gives a treat, and the local government pays for the money”. The central government seriously gives opportunities to the regions for the pilot program: being a pilot city carries honor and responsibility. Given the institutional environment of weak incentives and weak constraints, local governments participate in the pilot construction of low-carbon cities, so as to be recognized as legitimate. Local governments still actively apply for participation, with a view to securing the central government’s resources and other priority policies. Although many local governments enthusiastically apply for the pilot program, the work often peters out due to sluggish efforts, indicating that the motivation for applying for the pilot program is mistaken.

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In the policy environment of weak incentives and weak constraints, the performance of low-carbon cities in three pilot programs can be explained from the perspective of learning and competition of local governments. According to the local governments’ learning capacity and the central government’s intervention, local policy innovation can be divided into four models: competition, imitation, independent, and conservative. In policy areas that the central government is highly concerned about, local governments with strong learning capacity will actively explore new ways for policy innovation for the sake of better performance achievements, thus leading to a competition model. When the central government gives little attention or the incentive is insufficient, local governments have a large latitude. If the learning ability of local governments is strong, an independent model will be formed. When the learning capacity of local governments is weak, local governments will imitate innovations. In fact, many pilot cities adopt this model. Many pilot cities (some cities in central and western China) have average learning ability. Coupled with a lack of policy incentives, they do not meet the expectations for applying for the pilot program, and often adopt the conservative mode. In other words, they maintain the current policy and adopt the strategy of “not acting recklessly”. Because the conduct of local government officials is a key constraint on local economic growth, how to motivate local officials and change the local leadership structure and decision-making model is a core issue for local low-carbon development. The conduct of local government leaders in pilot cities is actually a process of participating in the regional competitive pilot program. In the context of China’s specific system, local government leaders (especially the “heads”) are important policy actors, and the administrative status of leaders, leadership participation and attention paid by leaders have an important impact on policy innovations. Baoding, Taiyuan, Zhenjiang, Guangyuan and Chengdu cities have scored remarkable achievements in the pilot program, which are related to the attention paid and importance attached by the main government leaders at that time. Key leaders generally exercise absolute authority at the local level, with adequate capacity to mobilize resources and coordinate departments. In particular, main local leaders are indispensable for some comprehensive tasks involving many departments and multi-level participation. To a large extent, they directly determine the intensity and results of the work.

2.3 Inspiration from Pilot Low-Carbon City On the whole, in the process of implementing the pilot program, local governments have made active exploration in light of local conditions and scored remarkable achievements, gaining rich experience. There are outstanding development cases worthy of summary and promotion.

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Coordinate Pollution and Carbon Emissions Reduction, and Optimize the Industrial Structure

Beijing promotes air pollution control and carbon emission control in a coordinated way. Since being selected as a pilot low-carbon city in 2012, Beijing has promoted continuous reductions in carbon intensity through campaigns such as industrial reorganization and rectification, carbon emission trading market, and subsidies for energy-saving products. It has been rated as “excellent” in the national greenhouse gas emission target assessment for six years in a row. Especially since the introduction of the Air Pollution Prevention and Control Action Plan in 2013, it has vigorously reduced coal consumption to improve the energy structure with the core goal of smog control. In 2020, the annual average concentration of PM2.5 in Beijing fell to 38 µg/m3 for the first time, a decrease of 42.6 µg/m3 from 2015. The proportion of coal consumption in the city’s energy consumption structure fell from 13.7% to 1.9%, and the energy consumption per unit of GDP was 0.23 tons. Beijing saw the fastest decline in energy intensity and the most efficient energy use in the country. Led by the “three goals” of carbon peaking, air quality up to the standard, and high-quality economic growth, Shenzhen continuously promotes the transformation and optimization of industrial structure as well as the industry upgrading. The average annual growth rate of GDP reaches 9%, and the added value of strategic emerging industries grows by 17% annually on average. The energy intensity and carbon intensity are far below the national average, declining by 5% annually on average. It has achieved high-quality economic growth.

2.3.2

Strengthen the Top-Level Planning and Establish a Mechanism for Unimpeded Communication

Chengdu promotes a system of green and shared transportation through a mechanism featuring innovation and consultation. Chengdu has set up a special platform for consultation among the government, enterprises, democratic parties, citizens and other participants. It holds meetings on a regular or irregular basis according to topics collected. Under the “3 + 7 + N” communication mechanism for co-building, consultation and co-management [the three departments of the municipal communication commission, public security traffic management and urban management, the city’s seven districts (counties), and N enterprises], it solves the common problems in the development of shared transportation in a timely manner. After the Wenchuan earthquake disaster, the Municipal Party Committee of Guangyuan City adopted the strategy of “low-carbon reconstruction and low-carbon development”. It has established a leading group for municipal low-carbon development headed by the main leaders of the municipal Party committee and the municipal government. A low-carbon development plan has been released in stages. The city pursues a path of low-carbon transition featuring effective leadership, strong support from think tanks, policy planning, prominent advantages, effective pilot demonstration and all-round development synergy.

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Take a Variety of Measures for Urban Management

Suzhou City strengthens the fine management of green, low-carbon industrial parks. In terms of capital input, the park has set up many special guidance funds to encourage enterprises in the park to promote energy conservation and environmental protection. Energy conservation service loans are issued in support of the development of environmental protection and energy-saving enterprises. In terms of talent training, better development platforms are established through industrial aggregation to attract highlevel personnel. Maker spaces are established to promote the cultivation of green and low-carbon industries as well as personnel. The park has been rated as a national pilot park for the circular economy, a pilot low-carbon industrial park, and a demonstration park for green and low-carbon development, as well as energy interconnection. Taiyuan City continuously innovates the urban public bicycle program. Based on the mild climate, flat terrain and compact space in the urban area of Taiyuan City, it provides scientific and personalized services for the general public under the principle of “government leadership, non-profit first” by introducing advanced technologies such as QR code, big data, and spatial geographic information integration in a timely manner, thus forming the “Taiyuan Model” for public bicycle program that is widely imitated.

2.3.4

Explore Market Mechanisms and Gain Good Experience

Guangdong Province is China’s first pilot carbon market region to implement a system of paid allocation for carbon allowances. The carbon market includes a primary and secondary market under the system of paid allocation of allowances. Because the earlier bidding floor price for allowances was set by the government, it was difficult to mirror the market supply and demand in a timely manner, thus encountering problems such as inversion of carbon prices in the primary and secondary markets, and distorted market signal. After the policy of linkage between the government’s reserve price and market carbon prices is implemented, the Guangdong carbon market runs smoothly, maintaining a good relationship between the government and the market. It has formed a carbon market featuring the secondary trading market, and proved that it is fairer to set differentiated free allowance ceilings for different industries, and to consider elements such as the potential for emission reduction, and responsibility for emission reduction. At the same time, Guangdong Province has explored the fixed guidance price and the hierarchically increasing bidding price within the performance cycle in terms of the paid bidding method for allowances. It has gained experience in holding auctions on a regular and irregular basis, providing a useful reference for the national carbon market to launch paid allocation.

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Build a Smart City and Promote Technological Empowerment

Xiamen explores the use of a full variety of intelligent IT-based means to support the construction of a low-carbon city. Xiamen has established an online intelligent management platform for carbon emissions. Thanks to online accurate monitoring, automatic regular carbon inventory, carbon reduction effect diagnosis and provision of implementation plans, intelligent reporting and online report audit functions, it provides diagnostic opinions on carbon reduction for enterprises as well as big data support for the government’s low-carbon management. Zhenjiang City in Jiangsu Province has pioneered the online platform for urban carbon emission management in the country, which basically realizes the scientific, digital and visual construction and management of a low-carbon city. It can better guide the low-carbon transition of industries, conduct regional carbon assessments, and manage the carbon assets of enterprises.

2.3.6

Introduce Laws and Strengthen Institutional Safeguards

Nanchang in Jiangxi Province is the first Chinese city to legislate on low-carbon development. Back in 2014, the Standing Committee of the Nanchang Municipal People’s Congress approved the legislative research project of Regulations on Promoting Low-Carbon Development in Nanchang (hereinafter referred to as the “Promotion Regulations”). After research and investigations by many parties, expert consultation, discussions with enterprise representatives, as well as many amendments, it was officially implemented in 2016. The Promotion Regulations feature a wide coverage, including environmental protection, energy, implementation of energy plans, implementation of standards for energy efficiency buildings, promotion of new energy vehicles, and encouragement of low-carbon agriculture. Considering the public awareness of low-carbon development, the Promotion Regulations have been covered by the mainstream media many times, and the first year after its promulgation was designated as the “Publicity Year” to interpret the regulations. Thanks to the legislative work of the pilot program, violations of laws and regulations such as environmental pollution and extensive development have been investigated and punished, and local governments and officials are held accountable for not abiding by the law. Green and low-carbon development is ensured by upholding the authority of the rule of law.

2.3.7

Adopt Nature-Based Solutions to Create Ecological Value

Xining City in Qinghai Province has gained experience and achieved results in exploring and generating the value of ecological products. In 2018, the Municipal Party Committee and the Municipal Government issued the Ecological Compensation Plan for Water Environment of the Nanchuan River Basin in Xining City, which

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pioneered the reservoir water compensation system and the hierarchical compensation prices. Through ecological compensation, the water quantity of the Nanchuan River is ensured, and the eco-environment of the river as well as water quality have been improved. The water quality is better than the preset indicators for a large part of the year. The “Forest Ecological Bank” in Nanping City, Fujian Province and the Forest Cover Index Transaction in Chongqing Municipality are the ecological resource indicators and property rights trading model. Because ecological products are characterized by being non-exclusive, non-competitive and difficult in defining their beneficiaries, this model creates the demand for trading in ecological products through government control or setting caps, so as to guide and motivate stakeholders to engage in trading. It is a value realization path that combines government guidance and market forces, featuring natural resource property trading and government-controlled allowances trading.

2.4 The Upgrading Path of Pilot Low-Carbon City In the process of promoting the pilot program, local regions have generally innovated, made exemplary efforts, achieved remarkable results, and gained rich experience, exposing the problems and weaknesses that restrict low-carbon development. Judging from the evaluation of the three pilot programs, the pilot cities fell short of the social expectations in terms of setting low-carbon development goals, exploring transition paths, changing new drivers for low-carbon development, etc. Especially in the face of an economic downturn, some pilot cities are not fully motivated. It is urgent to identify the root causes and find the solutions. The first is to stimulate the internal momentum for the low-carbon development of cities. At present, China promotes low-carbon development generally through administrative accountability level by level. As a result, local governments will easily be led by assessment, with inadequate internal momentum for pursuing low-carbon development. The “dual carbon” goals send a market signal to society for emission reduction, and drive the global development of deep decarbonization technologies and zero-carbon industries. The second is to improve the scientific demonstration mechanism for carbon peaking schemes in cities. Based on the pilot program of lowcarbon cities, the guiding opinions on the urban action plan for carbon peaking and carbon neutrality should be issued as soon as possible. All regions develop and peak carbon emissions in a coordinated manner under the national scheme. The third is to establish a long-term mechanism for both incentives and constraints. Carbon peaking and carbon neutrality are strategic plans made by the CPC Central Committee after deep deliberation, and are added to China’s overall plan for ecological conservation. All localities respond positively by competing to make explorations. It is necessary to establish an assessment and evaluation mechanism accordingly. Fiscal and tax support should be given to regions where the implementation achieves good results. The target management and accountability mechanisms should be further clarified for

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regions sluggish in making innovations. The fourth is to strengthen the policy orientation for high-quality economic development. The “dual carbon” goals are the internal constraint on promoting a new development pattern. High-quality economic development is the manifestation of the new development pattern. The internal logic of the three is consistent. It takes a long time for cities to achieve the “dual carbon” goals, which does not indicate no or slower economic development. Instead, it promotes innovative, efficient, energy-saving, environmentally friendly economic growth with high value added by optimizing the allocation of factors. This not only depends on policy innovation in a certain field, but also requires local governments to uphold the ideas on ecological conservation, take a correct view on evaluating cadres’ performances, take a long view, and seek a low-carbon development model in light of local conditions. Cities that can coordinate high-quality economic development and the “dual carbon” goals will stand out and play an exemplary role.

3 Cities Lead the Realization of the Carbon Peak Goal in the Country The alignment of the building of low-carbon cities with carbon peaking goal goes back a long way. In September 2015, the first U.S.-China Climate-Smart/ LowCarbon Cities Summit selected 16 pilot low-carbon cases as models of climatesmart/low-carbon cities. At the summit, the participating Chinese provinces and cities announced their target year to achieve the goal of carbon peaking, and the establishment of the Alliance of Pioneer Peaking Cities (APPC). At present, 87 pilot low-carbon provinces, municipalities and counties in the three pilot programs have set the goal of carbon peaking, of which 13 aim to achieve the goal during the 13th Five-Year Plan period, 43 during the 14th Five-Year Plan period, and 24 during the 15th Five-Year Plan period. However, the level of economic development varies greatly from region to region in China, and the process of carbon peaking in cities is characterized by obvious differentiation. On the one hand, the development gap among the eastern, central, western and northeastern regions is becoming more complicated. The GDP of the eastern region accounts for more than half of the national GDP, and the absolute difference between the eastern region and other regions in terms of per capita GDP is widening. In the context of the new normal of the economy, some central and western provinces are still at a stage of rapid industrialization, seeing nearly double-digit growth in GDP, whereas some cities in the northeast region see growth stagnation, population loss and urban contraction. On the other hand, the industrial division of labor is becoming increasingly solidified. The eastern region is at the forefront of high-quality development, while it is difficult for the central and western regions to shake off the carbon lock-in caused by resource dependence. Therefore, most of the eastern provinces have achieved weak decoupling and are moving towards strong decoupling, while many provinces in central and western regions still see an

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alternation between expansion linkage and negative decoupling of expansion. For different regions and different types of cities, we should emphasize precise policies for carbon peaking in batches, support core cities and key regions in achieving carbon peaking first, and build a “competition-cooperation” mechanism for cities to promote deep integration, and play a demonstration role in influencing other areas.

3.1 Path Selection and Priority Areas of Carbon Peaking in Cities At present, carbon peaking in cities is mainly assessed through the judgment of historical carbon peaking. To exclude the possibility of a short-term trend, urban carbon emissions reach the highest level compared with the latest carbon peaking within five years. In order to exclude false peaking, the urban carbon emissions in the next five years are allowed to rise during the plateau period, but cannot exceed the peak level. Many scholars and institutions predicted the urban carbon peaking: the findings of a study by the Chinese Academy of Environmental Planning show that Wuhan, Shenzhen and Kunming have achieved carbon peaking in 2012, 2010 and 2010 respectively. According to the Report on Progress of Chinese Cities in Carbon Neutrality released by the Chongyang Institute for Financial Studies of the Renmin University of China, the “carbon completion rate” indicator is formed through a comprehensive calculation based on the data related to urban green development and carbon emission reductions. The top 10 cities are Beijing, Shenzhen, Hangzhou, Shanghai, Guangzhou, Chengdu, Suzhou, Qingdao, Wuhan and Tianjin. The Institute of Public and Environmental Affairs conducted a survey based on the data from the China City Greenhouse Gas Working Group by using the Mann-Kendall’s trend analysis test, and found that Kunming, Shenzhen and Wuhan are the pioneer peaking cities, and Beijing, Shanghai, Guangzhou, Xiamen, Nanjing, Qingdao, Handan, Changsha and Zibo are the leading cities for carbon peaking. The consistent conclusion is that: First, key cities such as Beijing, Shanghai, Guangzhou, and Shenzhen have made great strides in carbon peaking. Beijing announced the successful completion of carbon peaking, and set a clear carbon neutrality target. Other key cities are highly likely to achieve carbon peaking during the 14th Five-Year Plan period. Second, carbon intensity has decreased significantly in eastern and southern coastal cities, which have progressed from controlling the intensity to controlling the total amount. Cities in southwestern China have outstanding potential for carbon reductions, thanks to their abundant ecological carbon sinks and a high proportion of clean energy consumption. Most of the cities in central and western China face the problems such as a high concentration of secondary industry and persistently huge coal consumption. Third, the different nature of the industrial structure leads to large differences in the key carbon reduction sectors in cities. Analysis should be conducted on a case-by-case basis and targeted policies implemented.

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The Path to Carbon Peaking in Industry-Dominated Cities

According to the data from the China City Statistical Yearbook 2019, of the 297 prefecture-level cities with complete data on their economy, there are a total of 29 cities where the contribution rate of the added value of the secondary industry exceeds that of the tertiary industry by 10%. The cities are mainly distributed in Shaanxi, Shanxi, Henan and other central and western provinces as well as the southern coastal provinces of Guangdong and Fujian. Typical cities are as follows: first, cities where resource exploration and mining industry dominates, such as Yulin in Shaanxi, Karamay in Xinjiang, Jincheng in Shanxi, and Daqing in Heilongjiang. Second, cities where the metal smelting industry dominates, such as Tangshan in Hebei, Panzhihua in Sichuan, and Yingtan in Jiangxi. Third, cities where equipment manufacturing dominates, such as Deyang in Sichuan, and Dongguan in Guangdong. Fourth, cities where the textile and garment industry dominates, such as Putian in Fujian. Economic growth in industry-dominated cities is mainly driven by the secondary industry. Their formation is linked to geographical location, resource endowments, and their history. Judging from data on urban carbon emissions, total carbon emissions and carbon intensity are both high in cities where resource mining or metal smelting dominates. They depend on resource exploration and processing industries for economic development, and a high carbon lock-in effect is gradually established. In these cities, a transition is difficult, and may also give rise to a slew of problems relating to unemployment, people’s wellbeing, etc. Most of the cities where equipment manufacturing and light industry dominate are at a stage of low carbon intensity and high total emissions, with per capita carbon emissions remaining at a high level. Industry-dominated cities should focus on improving the energy structure, and promoting the transition of industrial structure. On the one hand, they should upgrade and transform traditional industries, set production capacity according to demands, firmly close down outdated production facilities, and gradually launch an ultra-low emission transition. On the other hand, they should focus on the cultivation and growth of emerging industries, leverage new technologies, new industries, new business forms, new models, etc., highlight the supporting role of factors of production such as knowledge, technology, information, and data, spur the green upgrading of the industrial system, and treat air pollution in a coordinated manner.

3.1.2

The Path to Carbon peaking in Consumption-Oriented Cities

According to the data from the China City Statistical Yearbook 2019, of the 297 prefecture-level cities with complete data on their economy, there are a total of 77 cities where the contribution rate of the added value of the tertiary industry exceeds that of the secondary industry by 20%. They are evenly distributed in the country. Typical cities include: First, Beijing, Shanghai, Guangzhou, Chengdu, Hangzhou and other economically developed cities, where the contribution of the tertiary industry exceeds that of the secondary industry by more than 30%, up to 67% in Beijing.

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Second, tourist-oriented cities such as Sanya and Zhangjiajie. Third, most of the cities in northeast China. Most of these cities are in the post-industrialization stage, with population outflow, urban contraction, and weak economic growth. Consumption-oriented cities got off to an early start in economic development. After having undergone many industrial migrations and optimization, they have formed a tertiary industry-led industrial structure; or because of a lack of natural endowments and industrial foundation, buildings, transportation and household consumption have become the most key sources of carbon emissions. It is necessary to promote the reduction of emissions by urban buildings through new infrastructure construction, introduce systematic environmental protection standards for buildings, and implement net zero carbon solutions in urban construction. It is necessary to evaluate the green performance of completed buildings, assess circuits, water-saving systems, etc. comprehensively, and transform energy-intensive old buildings. It is necessary to continuously optimize the urban transportation networks as well as the distribution of key infrastructure, make greater efforts to introduce clean energy to urban public transportation, make green consumption a fashion among residents, and strive to establish a new demonstration zone for carbon peaking.

3.1.3

The Path to Carbon Peaking in Cities with Comprehensive Development

The secondary and tertiary industries are balanced in cities with comprehensive development, such as Wuhan, Chongqing, and Suzhou. The original competitive industries such as equipment manufacturing and metal smelting develop in a balanced manner with the tertiary industry. In cities with comprehensive development, the level of economic development and urbanization is still on the rise, and the per capita carbon emission remains persistently high. In view of this, such cities should focus on the four key sectors of industry, energy, construction and transportation, strictly control the growth of energy-intensive industries such as cement, steel, and petrochemical engineering, and speed up the transfer or transformation and upgrading of energy-intensive industries. These cities should vigorously develop high-tech and modern service industries, and build a more diversified industrial system; and foster paired-up cooperation with clean energy supply areas to change the situation in which coal-fired power plants are absolutely dominant.

3.1.4

The Path to Carbon Peaking in Cities that Prioritize Ecological Conservation

According to the data from China City Statistical Yearbook 2019, there are few cities in China with agriculture as the pillar industry, and there are 31 cities where the primary industry contributes more than 20%, mainly concentrated in Heilongjiang, Guangxi and Yunnan provinces. Typical cities are Jiamusi in Heilongjiang, Guilin in

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Guangxi and Xishuangbanna in Yunnan. Cities that prioritize ecological conservation have important ecological areas, and undertake key ecological functions such as water source conservation, biodiversity conservation, and provision of agricultural and forestry products. Regarding the policy on carbon peaking in cities that prioritize ecological conservation, they should pay more attention to emission reduction in agricultural production, transform the mode of agricultural production, rationally allocate agricultural land resources, and promote modernized agriculture characterized by high efficiency and low carbon, such as biological farming, water-saving farming, and facility agriculture. On the other hand, it is necessary to ensure the protection of ecological conservation areas, develop eco-tourism on a moderate scale, accelerate the development of clean energy, and provide support for other regions.

3.2 Establish a Mechanism for Incentive, Constraint and Assistance Cooperation Among Cities In order to play the exemplary role of outstanding low-carbon cities in pilot programs, improve the policy environment of weak incentives and weak constraints, stimulate the internal momentum for urban low-carbon development, and increase the application of beneficial experiences, it is necessary to build a mechanism for playing the leading role in terms of the two dimensions of incentive and constraints as well as assistance cooperation.

3.2.1

Multiple Strategies to Stimulate the Internal Motivation of Local Governments

(1) Update and detail the assessment and evaluation mechanism. Since the development of low-carbon cities involves many respects such as eco-environmental protection, urban construction, investment and financing, local government leaders are required to fully mobilize resources and coordinate departments. Their initiative for work and administrative level is vitally important. In 2016, the state issued a series of documents such as the Measures for the Assessment and Evaluation of Goals of Ecological Conservation, which provide a general idea for incorporating ecological conservation into the evaluation of cadres’ work performance. However, in practice, there are problems such as the overlapping of central and local assessment systems, repeated evaluations, insufficient use of assessment and evaluation results, and failure to show the idea of development priority zones. At present, the work on carbon peaking will be included in the central government inspections on environmental protection. It should be updated for each city on the basis of the original Measures for the Assessment and Evaluation of Goals of Ecological Conservation, especially in terms of the articulation of carbon peaking targets set by all cities. It should be

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incorporated into the high-quality development evaluation system for unified evaluation and assessment. At the same time, the systems for audit of natural assets at the retirement (or during the tenure) of leaders, lifelong accountability for damage to the natural environment, etc. are improved. (2) Increase fiscal and tax policy support. It is necessary to improve the policy environment of weak incentives and weak constraints, and encourage cities to set the goal for carbon peaking in advance, such as guiding special-purpose bonds for local governments to invest in new energy industries, and low-carbon transformation of urban transportation and buildings; set up government-guided special funds for carbon neutrality, comprehensively use subsidies, awards, guarantees, etc. to attract social capital, so as to reduce the cost of project construction and transformation. 3.2.2

Better Play the Role of Paired-Up Collaboration in the Field of Low-Carbon Development

At present, rich experience has been amassed in the paired-up cooperation between local governments as well as between provinces and cities in eastern and western China. The “dual carbon” goals in the new development stage should be placed under cooperation: make clear the responsibility system for targeted assistance, and establish a “one-on-one” paired-up assistance mechanism in light of the carbon peaking goal set by cities as well as the current status; provide technical paired-up assistance, match developed cities and scientific research institutes with industry-dominated cities, increase the exchange of scientific research personnel, and jointly build demonstration low-carbon industrial parks; provide paired-up assistance in the ecological industry. Consumption-oriented cities can help cities that prioritize ecological conservation develop agricultural products in terms of transportation, processing, sales, etc., extend the industrial chain, increase added value, and effectively combine low-carbon development with rural revitalization strategy.

3.2.3

Improve the Information Disclosure and Experience Exchange Mechanism for Low-Carbon Urban Development

Information disclosure is a prerequisite for evaluation and competition. At present, China is still in the exploratory stage in terms of climate and environmental information disclosure, and the information disclosure among enterprises and industries is hardly comparable. In view of this, government departments should set an example. Competent departments should prepare disclosure rules and templates, and local governments should make public carbon peaking targets through official channels, and regularly disclose environmental information and relevant progress. Since the launch of the pilot work, relevant departments held an exchange meeting for experience summary and evaluation in 2016. The competent central departments should

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hold special meetings on experience sharing periodically, or advanced peaking cities can organize publicity groups and hold theme forums in turn, so as to increase communication among cities.

4 Build a New Engine for Zero-Carbon Urban Development Carbon neutrality means net zero emissions. Carbon emissions necessary for economic and social activities are captured and stored by forests as carbon sinks or other technical means, and the ultimate increase in greenhouse gas emissions released into the atmosphere is zero. China has large total carbon emissions, high peaks, and a short interval between carbon peaking and neutrality. It is also affected by the coal-based energy structure and consumption upgrading. The task of achieving carbon neutrality is arduous. Carbon peaking in cities is the first step toward carbon neutrality. First of all, it is not a case that the higher the peak, the bigger the space for urban development. Carbon emissions have a lock-in effect, and carbon neutrality is somewhat rigid. Therefore, the earlier the peaking time and the lower the peak value, the more favorable for cities to achieve carbon neutrality. Therefore, cities should clarify the deadline for carbon peaking. Cities where conditions permit should be supported to peak carbon emissions as soon as possible during the 14th Five-Year Plan period. Second, the fundamental issue of carbon peaking and carbon neutrality is an energy issue. It requires the development of a high proportion of non-fossil energy, and the accelerated establishment of an energy system featuring renewable energy such as wind power, hydropower, solar power, biomass energy, tidal energy, and third-generation nuclear energy, so as to reduce the carbon intensity per unit of energy, and promote the realization of energy and environmental goals in the new development pattern. Cities are the places where industry, energy consumption and population gather. In order to improve urban energy consumption structure, and eventually form a model of net zero carbon development, it is necessary to conduct technological reform and adopt an innovative policy in terms of urban planning, architectural design, transportation distribution, etc. Finally, under the new normal of economy, China’s urbanization reaches a critical period of transition from high-speed to quality development. The National New Urbanization Plan (2014–2020) formally put forward the idea of people-oriented urbanization for the first time. The report of the 19th CPC National Congress proposed a New Concept for Development and a strategy for coordinated regional development. The construction of zero-carbon cities and new urbanization are guided by the same ideas. Under the new development pattern, policies on “new infrastructure construction”, rural vitalization, urban renewal, etc. will spur innovations in renewable energy technologies and industry implementation, forming a virtuous closed loop.

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4.1 Optimize the Spatial Layout of New Urbanization China has a number of megacities after years of rapid urbanization. Although the agglomeration of megacities and large cities brings positive externality such as promoting the further division of labor and releasing potential for innovation, it causes uneven development to some degree: On the one hand, the concentrated population in the main urban area and core areas, and traffic congestion aggravate “urban diseases”. Urban transportation and buildings become the chief carbon emitters. On the other hand, suburbs and surrounding small and medium-sized cities develop slowly due to a lack of vitality, and some even face contraction. One of the key reasons for these problems is the model of a “single center” in traditional urbanization. The allocation of public resources is characterized by path dependence. Under the existing urban administration system, commercial centers, shopping and entertainment malls, and quality public service resources (e.g., schools and hospitals) are concentrated in traditional main urban areas, which inevitably causes urban congestion and increases carbon emissions as a result of the travel of residents. The urban spatial layout must be optimized. It is very important to gradually transition from “single-center” urbanization to “multi-center” and “scattered” urbanization. Judging from the experience of megacities in emission reduction such as London, Tokyo, and New York, it is important to expand the metropolitan area, make urban functional areas less compact, and develop multiple centers where residents work and live. According to the National New Urbanization Plan (2014–2020), in order to promote the functions of the central urban area to extend to the onehour traffic circle area, and build a metropolitan circle featuring efficient commuting and integrated development, the core idea is to integrate the central urban area and surrounding urban areas into a convenient and efficient new urban center for work and living through industrial division of labor, urban transportation, communication technology, etc. To progress from “multi-center” to “scattered centers”, it is necessary to weaken the impact of the administrative level on the allocation of public resources, gradually decentralize authority for urban management, and develop small and medium-sized featured towns.

4.2 Accelerate the Low-Carbon and Zero-Carbon Transformation of Urban Buildings and Transportation The carbon emissions released by urban buildings mainly originate from hidden carbon, transportation, construction, operation, etc. regarding building materials, and become the primary carbon sources in many cities. Therefore, the construction, expansion and renovation of urban buildings should be conducted in a low-carbon or zero-carbon way to achieve carbon neutrality. The first is to set high-level energy

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conservation standards, make the existing buildings more energy-efficient, and integrate energy-saving renovation and building-integrated photovoltaics into the transformation of old residential areas. The second is properly plan new construction projects, improve the service life of buildings, extend the reconstruction cycle, avoid the construction of energy-intensive ultra-high-rise buildings as far as possible, and plan to build small high-rise buildings with a moderate number of floors. The third is to adopt measures for green buildings such as climate-adaptive buildings, energysaving buildings, and negative lists of carbon, and bring into play the advantages of green buildings in energy conservation and emission reduction in the whole lifecycle. The fourth is to consider zero-carbon buildings. Such buildings are being promoted in foreign countries, such as Sigma zero-carbon houses and “self-sustaining” houses in Britain and three-liter houses in Germany, and gradually apply nature-based solutions. The low-carbon or zero-carbon transformation of urban transportation is also vital. Most of the world-renowned low-carbon cities operate developed public transportation. Copenhagen is an international “capital of bicycles. Chinese cities such as Taiyuan and Hangzhou also operate mature public bicycle projects. Globally, the British Department for Transportation and the American City of San Francisco put forward a roadmap for net zero emissions transportation in 2018 and 2019, respectively. These include measures such as zero emissions for government vehicles first and the clean energy use of new vehicles. In the short term, Chinese cities can improve the transportation structure, promote multimodal transportation for goods, advocate public transportation, and improve transportation efficiency. In the medium and long term, China, as the largest consumer of new energy vehicles, should continue to encourage residents to use new energy vehicles, vigorously develop electricity-based public transportation, and develop zero-emission fuels for long-distance transportation.

4.3 Empower Carbon Reduction and Emission Control with Digital Urban Construction “Digital” development and “green” development are two important trends in urban development. The 14th Five-Year Plan of provinces (autonomous regions and municipalities directly under the central government) give great prominence to these two areas. Digital development and the carbon neutrality goal are intertwined and mutually reinforcing. The application of new technologies and new business forms such as big data, cloud computing, and the IoT plays a key role in the monitoring, early warning and management of carbon emission sources. Digital city construction empowers emissions reduction and control in cities through a considerable number of application scenarios. First, the support of digital technology for the low-carbon transition of traditional industries, such as promoting the upgrading of power grids to energy interconnection, digitally transforming

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central heating to reshape the building-oriented energy system, and building a digital management system for natural resources and land to aid the development of smart agriculture. Second, build a digital urban carbon emission management system. In terms of carbon measurement, strong data analysis and computing capabilities can be used to investigate the current situation of carbon emissions and improve the carbon verification system on the basis of the unified management of IoT assets, real-time access to multiple data, cross-validation of data, etc. In terms of carbon management, industrial parks, production enterprises, residential communities, etc. can be connected for real-time carbon emission monitoring and automatic early warning. Third, build a digital service system for the carbon market. With the official launch of the national carbon trading market, it is necessary to strengthen urban digital development to establish processes including the registration of assets on the urban carbon asset list, trading, technical consulting, and credit portrait.

4.4 Foster Interregional Energy Cooperation The fundamental issue of carbon peaking and carbon neutrality is an energy issue. However, due to limited resource endowments, it is difficult for the large cities and mega-cities in the eastern region to complete the transition of energy consumption alone. China is rich in clean energy resources, but the distribution is characterized by a reverse distribution of resources and load centers. Southwestern China, northwest China, north China, and northeast China have abundant hydropower, wind and solar energy resources, while 70% of power nationwide is consumed in the eastern coastal and central provinces. It means that it is imperative to use grid interconnection to achieve complementarity of wind and solar power, mutual assistance among regions, and balanced power generation and use. In practice, the issue of renewable energy consumption is prominent because of the limited technical conditions for power supply, peak shaving, energy storage, and power grid construction, as well as the imperfect energy price system. Abandonment of wind and photovoltaic power is common. This essentially reflects the development gap and inadequate deep integration among regions. The focus is to remove interprovincial barriers to power coordination. On the one hand, the central and eastern cities should resolutely promote the orderly phase-out of the coal and coal-fired power generation industries, and drive the electrification of the energy system based on terminal consumption demand. Cities in western China should explore the construction of a large-scale comprehensive energy base “integrating wind power, photovoltaic power, coal-fired power, and storage” based on the joint operation of power generation and coal mining, as well as strengthening the capacity for local consumption of renewable energy. On the other hand, it is necessary to remove the institutional obstacles to power coordination, move faster to build a national unified electricity market, promote direct electricity trading across regions and provinces, and lower the costs of west-to-east electricity transmission through the expansion of market size. Moreover, cities in

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eastern China should leverage their advantages in terms of abundant capital, technology and enterprise resources, take the lead in making technical breakthroughs, enhance the capacity for independent R&D of the core technologies in the renewable energy industry, invigorate the spatial resources of the western region, and aid the domestic economic cycle. It is of significant and far-reaching importance for cities to achieve the “dual carbon” goals. In order to make a good start for the “dual carbon” goals during the 14th Five-Year Plan period, all cities should, under the guidance of Xi Jinping’s Thought on Ecological Civilization, maintain the strategic focus on developing ecocivilization, comprehensively consider factors such as energy security, economic growth, people’s wellbeing, and cost input, formulate policies and action plans in light of local conditions, set the timescale and realization paths for the tasks, align the current tasks with long-term development, and make greater contributions to the realization of the “dual carbon” goals.

References CPC Central Committee Literature Research Office, ed., Selected Important Documents Since the Eighteenth CPC National Congress (Part I), Central Literature Publishing House, 2014 edition, p. 603. CPC Central Committee Literature Research Office, ed., Excerpts from Xi Jinping’s Statements on the Building of Socialist Eco-civilization, Central Literature Publishing House, 2017, p. 67. Xi Jinping, “Major Issues Concerning China’s Strategies for Mid-to-Long-Term Economic and Social Development”, QSTHEORY, No. 21, 2020.

Chapter 11

Synergy for Carbon Peaking and Carbon Neutrality Goals and Economic, Social, Ecological Environmental and Energy Objectives Xianqiang Mao, Zhi Guo, and Yubing Gao

The realization of the carbon peaking and carbon neutrality goals is a complex system program that involves economic, social, energy, ecological environment and other factors. It requires systematic planning and coordinated promotion by all fields and sectors. The key to achieving the synergy of the carbon peaking and carbon neutrality goals is to take a holistic and systematic view, strike a balance between economic development and carbon emission reduction, between short-term and longterm goals, and between overall and local imperatives, and explore the path of goal synergy. We take carbon reduction as the strategic orientation, lead high-quality economic development, ensure a fair and just social transition, seek greater synergy between curbing pollution and cutting carbon emissions, consider the cleanliness and safety of energy, and keep industrial cultural traditions alive as appropriate.

X. Mao (B) · Z. Guo · Y. Gao School of Environment, Beijing Normal University, Beijing, China e-mail: [email protected] X. Mao Beijing, China © China Financial & Economic Publishing House 2023 G. Zhuang and H. Zhou (eds.), China’s Road to Carbon Peaking and Carbon Neutrality, https://doi.org/10.1007/978-981-99-3122-4_11

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Carbon Peaking and Carbon Neutrality Goals Have an Overall Impact

The setting of the carbon peaking and carbon neutrality goals not only demonstrates China’s international responsibility to tackle climate change and promote the building of a community with a shared future for mankind, but also reflects China’s determination to pursue high-quality development and promote a green and low-carbon transition of society and economy. As General Secretary Xi Jinping stressed at the ninth meeting of the Central Committee for Financial and Economic Affairs held on March 15, 2021, achieving carbon peaking and carbon neutrality is an extensive and profound systemic reform for the economy and society, and the targets should be incorporated into China’s overall layout of building an ecological civilization.1 To peak carbon emissions and achieve carbon neutrality is a systematic program that involves economic, social, energy, ecological environment and other fields. It requires systematic planning and coordinated advancement in multiple fields.

1.1 The Realization of Carbon Peaking and Carbon Neutrality Goals Affects All Aspects of Work and Life To realize the carbon peaking and carbon neutrality goals, the key is the green transition of the current high-carbon energy system. This will disrupt the fossil fuel-based energy production and consumption structure since the Industrial Revolution, and 1

“Xi Jinping presides over the ninth meeting of the Central Committee for Financial and Economic Affairs, stressing the need to promote the regular, healthy and sustainable development of platform economy and to incorporate carbon peaking and carbon neutrality into China’s overall plan for ecological conservation”, People’s Daily, March 16, 2021.

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will reconstruct our approaches to work and life, and reshape our economic and social forms. Energy systems and infrastructure will be decarbonized. At present, China’s fossil energy accounts for 85% of primary energy, and accounts for about 90% of the total carbon emissions of society.2 To achieve carbon peaking and carbon neutrality, it is necessary to decrease the proportion of fossil energy while increasing the proportion of renewable energy. Fossil energy infrastructure will be gradually phased out or undergo a low-carbon transition. In addition to hydropower, we will vigorously develop wind energy, solar energy, nuclear power, hydrogen energy, biomass energy, geothermal energy, marine energy, etc. We will form a modern energy production and consumption system featuring renewable energy and new energy, in which multiple sources of energy complement. The industrial structure will be reshaped and the industrial chain decarbonized. Traditional high-carbon industries such as thermal power generation, steel, cement, and chemical engineering will undergo a low-carbon transition on the basis of “approving larger projects, suspending smaller ones, and closing down outdated production facilities”, and their proportion in the economic structure will be reduced gradually. Emerging industries of strategic importance, high-end manufacturing and modern service industries will see greater development. Low carbon will also become a new standard for industrial chains. Apple Inc., for example, has committed to achieve carbon neutrality for its entire business, production supply chain, and product lifecycle by 2030.3 This means that every link in the industrial chain must be carbon neutral, including the acquisition of raw materials, parts production, chip manufacturing, and product assembly. This will lead to a new standard for the industrial chain. The way residents live will be profoundly changed. Pure electric vehicles will become the mainstream of new vehicles, and public transit will also be fully electrified. Hainan Province is the first in China to put forward a total ban on the sale of fuel-powered vehicles in the province from 2030.4 Electrification will be further used in the fields of buildings, households, etc. Heating, cooling, lighting, household appliances, etc. will also be more intelligent on the basis of electrification. User habits of electricity consumption can be learned through digital collection technology to achieve targeted electricity consumption, energy saving and carbon reduction. Distributed solar photovoltaic facilities and distributed storage devices will be further popularized in the field of construction. Green and low-carbon technology innovation will be promoted. A constraint on total carbon emissions will promote the research and development of key core technologies such as energy efficiency improvement, smart grids, efficient and safe energy storage, hydrogen energy, and carbon capture, utilization and storage. It will also 2

Liu Zhenya (2021). “Apple Inc. plans to achieve carbon–neutral supply chain and products by 2030”, Xinhuanet, July 21, 2020. 4 “Hainan to impose a total ban on oil-fueled automobiles as from 2030”, Hainan Daily, March 5, 2019. 3

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accelerate the development and large-scale application of low-carbon, zero-carbon and carbon negative technologies, and promote a shift from economic growth’s dependence on resources to dependence on technology. Eco-environmental systems will be improved in a coordinated manner. The potential of conventional pollutant emission reduction measures such as structural pollution reduction, management-based pollution reduction, and engineering-based pollution reduction has been fully tapped, and the marginal cost of pollution reduction has increased, making it difficult to achieve further improvement. Guided by the carbon peaking and carbon neutrality goals, there will be fundamental changes in energy structure and the ways of working and living, and large-scale carbon reduction will release more potential for pollution reduction, which help to achieve coordinated improvement of eco-environmental quality. The policy system for a green economy is gradually improved. The government will improve fiscal, financial, tax, monetary, price, subsidy, credit and other policies related to green, low-carbon development, expand the carbon trading market, and explore the implementation of new instruments such as carbon tax and carbon neutrality bonds to introduce more funds into the green, low-carbon development field. Examples like this are numerous. Overall, carbon peaking and carbon neutrality indicate a tremendous change in China’s social and economic field, because it will bring a profound impact and challenges to China’s economy, society, energy, technology, policies and even residents’ lives. The realization of the carbon peaking and carbon neutrality goals is a complex system program that requires proactive efforts in terms of industrial sectors, technological R&D, eco-environmental protection, and people’s wellbeing protection.

1.2 Achieving Carbon Peaking and Carbon Neutrality Goals Requires Systematic Planning Since achieving carbon peaking and carbon neutrality goals is a long-term, huge system program, we should consider the continuous reduction of total carbon emissions and carbon intensity, and also consider high-quality sustainable economic growth in the process. China is still in the late stage of industrialization and urbanization. We must ensure the sustained and stable development of the economy, and continuously increase the income of residents. We should comprehensively coordinate and consider the impact on all aspects of life, such as solving problems such as unstable and unbalanced distribution of new energy- based power generation. We should meet the demand for the growing energy consumption necessary for the improvement of people’s living standards, as well as their urgent pursuit of a high-quality eco-environment with blue skies and clear water. We should redress the

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development imbalance between the east and west, between the north and south, and between urban and rural areas, and so on. Therefore, it is necessary to seriously and systematically study the issue of how to balance the carbon emission reduction goals with other economic and social development goals. We should not only seek a path of coordinated development from the social, economic, energy, environmental and other perspectives, but also consider regional development differences, seek regional coordinated development, as well as seeking a comprehensive balance from the perspectives of “family - community city - province - country - world”. In short, to achieve the carbon peaking and carbon neutrality goals, we must apply the system concept, promote development while also reducing emissions, balance overall and local imperatives, as well as short-term and long-term goals, apply systems thinking and scientific methods to formulate targeted programs, and pursue a scientific and reasonable, low-carbon development path in line with the reality.

2 Carbon Peaking and Carbon Neutrality Lead to High-Quality Economic Development The carbon peaking and carbon neutrality goals bring opportunities as well as challenges for high-quality economic development. We will see tremendous changes in economic growth, industrial structure improvement, the research and development of green and low-carbon technologies, etc. President Xi Jinping said at the China-France- Germany Leaders’ Climate Summit via video link on April 16, 2021: “This means that China, as the world’s largest developing country, will complete the world’s largest reduction in carbon intensity, and achieve the transition from carbon peaking to carbon neutrality in the shortest time in global history. This is undoubtedly an uphill battle.”5 In this process, we should balance short-term and long-term interests.

2.1 The Impact of Achieving Carbon Peaking and Carbon Neutrality Goals on Economic Development China is currently in the deepening stage of industrialization and urbanization, and industrial added value still accounts for about 1/3 of GDP. China’s per capita GDP is significantly lower than that of European and American countries during their carbon

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“Xi Jinping Holds Video Summit with French and German Leaders”, People’s Daily, April 17, 2021.

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peak period.6 The total energy consumption will continue to increase in the foreseeable future, and economic growth and carbon emissions are yet to be “decoupled”.7 A great deal of high-carbon assets, such as chemical parks, coal mining areas, oil and gas wells as well as oil and gas pipelines, steel mills, cement plants, and gasoline and diesel vehicles, are facing transformation or phase-out. If radical measures are taken to achieve the carbon peaking and carbon neutrality goals in the form of “shock therapy” or “Great Leap Forward”, and to rapidly reduce the production capacity of traditional high-carbon industries like thermal power generation, steel and cement in the short term, it will have serious repercussions for the national economy. In the absence of significant improvement in the current economic structure and technological conditions, implementing emission reduction measures that feature industrial restructuring, industry-wide energy efficiency upgrades and fossil energy substitution will increase the production and operating costs of enterprises, weaken industrial competitiveness, and, at least in the short term, bring about a significant impact on economic development. In the long run, however, achieving carbon peak and carbon neutrality will bring about a global technological revolution that will force China to gradually move away from high input, high consumption and high pollution towards a quality development path of low input, high efficiency and low pollution in its economic development, creating opportunities for China to overtake other countries in terms of economy. Although the improving industrial structure decreases the space for the development of energy-intensive industries such as coal-fired power generation, steel, cement, and chemical engineering, strategic emerging industries, high-tech industries and environmental protection industries will become new drivers for economic growth, and generate demand for huge investment. According to the calculations by different institutions, the total investment required to achieve low-carbon to zero-carbon development in China in the next 30 years is 70 trillion yuan to 140 trillion yuan, involving such fields as renewable resource utilization, energy efficiency improvement, new energy vehicles, electrification of household appliances and other terminal products; wind power, photovoltaic power, nuclear power, energy storage, hydrogen energy, UHV transmission, smart grids, CCS and other zero-carbon or carbon negative technologies, as well as digitalization. The advance of China’s carbon peak and carbon neutrality goals will drive huge investment in green and low- carbon industries, and will also promote sizeable development in related fields.8 Pricing carbon dioxide through carbon trading markets will also bring changes to manufacturing industries. With the carbon markest becoming increasingly active, carbon trading will become a new fulcrum for new types of companies to generate revenue. For example, Tesla earned a profit of US$1.4 billion from the sale of carbon credits in 2020.9 If we do 6

National Bureau of Statistics of the People’s Republic of China: China Statistical Yearbook 2020, China Statistics Press, 2020 edition. 7 Hu An’gang (2021). 8 Ping An Securities Research Institute (2021). 9 “Tesla earns money but not by selling cars! This revenue is the key to Tesla becoming profitable for the first time in 2020,” National Business Daily, February 2, 2021.

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not vigorously reduce carbon emissions and accelerate the zero-carbon transition of the manufacturing sector, Chinese enterprises will also face a “carbon barrier” for exports. On March 10, 2021, the European Parliament voted and adopted a resolution supporting the establishment of a “carbon border adjustment mechanism (CBAM)”, which means that carbon tariffs will be levied on some EU imports from 2023. Similar mechanisms are in the pipeline in several other countries and regions. This will have a significant impact on the scope of export markets, trade volume and corporate benefits of China’s high-carbon enterprises. Therefore, to achieve the “dual carbon” goals, we should take into consideration both long-term and short-term interests. It requires a scientific approach to plan and control the process of carbon peak and carbon neutrality. We must not implement a short-term “one-size-fits-all” exit policy for high-carbon industries without regard to the economic development needs and technical conditions. We should not consider short-term interests only, and believe that there is still a broad space for emission reduction before carbon peaking, and vigorously develop high-carbon industries, which will make it more difficult to achieve the carbon neutrality goal.

2.2 The Impact of Achieving the Carbon Peaking and Carbon Neutrality Goals on the Industrial Structure peaking and carbon neutrality will promote an improvement in industrial structure. This process will suppress the development of energy-intensive sectors, such as steel, cement, chemical engineering, and non-metallic mineral processing, and accelerate the depreciation of high-carbon social capital and the obsolescence of knowledge and technology related to high-carbon development. In the case of the coal-fired power generation industry, in 2020, China’s newly added coal-fired power units exceeded 38 million kilowatts,10 the total installed capacity of coal-fired power plants was 1.08 billion kilowatts,11 and the total number of units under construction or to be completed reached about 250 million kilowatts.12 According to the Research Report on Chinese Carbon Peaking by 2030 released by the Global Energy Interconnection Development and Cooperation Organization (GEIDCO), it is predicted that in order to achieve China’s carbon carbon peaking by 2030, coal-fired power generation capacity should peak in 2025, reaching a peak capacity of 1.1 billion kilowatts.13 This means that in order to achieve the “dual carbon” goals, strict control measures should be implemented on the construstion of new coal-fired power generation units,

10

Wu Di et al. (2021). “The proportion of installed capacity of coal-fired power generation fell below 50% for the first time”, People’s Daily, February 7, 2021. 12 Wu Di et al. (2021). 13 Research report on China’s peak CO2 emission before 2030, Global Energy Interconnection Development and Cooperation Organization, March 2021. 11

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so as to avoid excessive losses caused by the accelerated depreciation of high-carbon assets as well as elimination in the future. While suppressing the development of high-carbon industries, the “dual carbon” goals will have an impact on the market share of traditional industries, such as increasing the relative share of output in low-carbon sectors such as agriculture, light industry and service industries. On the other hand, it will promote the development of new types of low-carbon industries, such as energy saving and environmental protection, digital industries, emerging information, biology, high-end manufacturing, and modern service. These new industries will become a new driver for the growth of the green economy, and drive the transformation and upgrading of the upstream as well as downstream industrial chains through the provision of new products and services. On the whole, the “dual carbon” goals create an opportunity for China’s industrial structure improvement. Due to technological advancements in this process, energy will be used more efficiently, greenhouse gas and pollutant emissions per unit of energy production and consumption will be reduced, and low-carbon industries and high-tech industries will develop at a faster rate. High-carbon industries should be phased out and scaled down in light of their development status, with consideration to the overall production capacity and actual needs of industries. We should implement differentiated management and gradual exit mode, and particularly keep in mind the schedule and implementation steps. At the same time, we promote the low-carbon transition of traditional high-carbon industries in the process of integration with strategic emerging industries, high-end manufacturing and modern service industries.

2.3 The Impact of Achieving the Carbon Peaking and Carbon Neutrality Goals on the Research and Development of Green and Low-carbon Technologies Carbon peaking and carbon neutrality require not only an energy revolution, but also a technological revolution. In the long term, the “dual carbon” goals will force the development of green, low-carbon technologies, increase investment in low-carbon technologies, promote technological advancement, and gradually reduce energy consumption and carbon emissions per unit of GDP. The key to achieving the “dual carbon” goals lies in making breakthroughs in carbon neutral technology. At present, carbon peaking and carbon neutral technologies fall into three categories: carbon reduction technology, zero carbon technology, and carbon negative technology.14 Carbon reduction technologies primarily refer to energy saving and emission reduction technology, involving fuel substitution, process substitution and optimization, treatment efficiency improvement, and recovery of resources. The technologies are primarily applied to steel, electricity, cement, chemical engineering, transportation, construction and other sectors. When there is yet no breakthrough in zero carbon 14

He Shaojia (2021).

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and carbon negative technologies, and the promotion cost is still high, the relatively mature carbon reduction technologies are still a key way to achieve carbon emission reduction. Energy efficiency improvement is one of the key measures to achieve carbon peaking, particularly for the industrial sector, which is the pillar industry of China’s economic development and a big energy consumer. China’s industrial sector should keep to the development pattern in which mature energy efficiency technology is the mainstay in the near term, and low-carbon technology innovation is the core in the medium and long term.15 In the near future, we can start with high-carbon industries such as steel and cement. For example, short-process electric steelmaking, preheating decomposition of cement raw materials and other technologies. Moreover, digital technology can be used to reduce carbon emissions in a smart way. In energy-intensive industries with high emissions such as steel, cement and thermal power generation, digital technology can be used to record and track carbon emissions in all links of the industrial chain, and digital control and regular process management can be used to reduce carbon emissions. Zero-carbon technologies primarily refer to clean energy technologies with zero carbon emissions, including wind power generation, photovoltaic power generation, zero-carbon hydrogen production, nuclear energy, etc., as well as the technology R&D and establishment of energy storage systems. On the one hand, we must increase investment in R&D, improve the energy efficiency of zero-carbon technologies, and cut its economic costs. On the other hand, traditional industrial sectors should also take full advantage of zero-carbon technology to replace fossil energy, such as the R&D of green hydrogen- based steelmaking process in the steel industry, the use of green hydrogen instead of traditional fossil fuels in the cement industry, and the development of hydrogen chemical engineering in the chemical industry. Carbon negative technologies refer to the technologies for capturing, sequestering, utilizing and processing carbon dioxide from exhaust gas or the atmosphere. Carbon negative technologies fall into two categories: first, increase ecological carbon sink technologies, use biological processes to promote carbon removal, and store carbon emissions in forests, soils or wetlands. Second, develop technologies for carbon dioxide capture, storage, utilization, conversion, etc. Fossil fuels will not be completely withdrawn from human society until we make comprehensive breakthroughs in and universal application of zero-carbon energy technologies. Therefore, carbon negative technology is indispensable in the process of achieving carbon neutrality. In a word, due to uncertain technological breakthroughs in the process of the low-carbon transition, it is necessary to ensure technical reserves in many areas, make overall planning, and coordinate multiple paths. At the same time, we should increase investment in the R&D of low-carbon, zero-carbon and carbon negative technologies. We should establish a sound assessment and trading system for green low-carbon technology as well as a technological innovation service platform to promote breakthroughs in green, low-carbon technologies.

15

Liu Junling et al. (2019).

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3 Synergy of Carbon Peaking and Carbon Neutrality with Social Equity To realize the “dual carbon” goals, we should focus on efficiency, and maximize the allocation of limited carbon emission permits, so that economic growth is not or less impacted. Moreover, we should pay attention to quality, and force the economic development towards high-quality development under the “dual carbon” goals. We should also take into consideration fairness. In other words, we should consider the impact of the realization of the “dual carbon” goals on the welfare of different populations as well as the different levels of development in different regions. A fair and just transition is a key part of the realization of the “dual carbon” goals.

3.1 The Synergy Between the Carbon Peaking and Carbon Neutrality Goals and the Labor Force Transfer and Employment In the process of promoting the low-carbon transition and achieving the “dual carbon” goals, we should take into consideration social equity in addition to pursuing economic efficiency. The carbon peaking and carbon neutrality goals may cause the depreciation and early phase-out of high-carbon fixed capital in coal, thermal power generation, steel and other industries, which will create problems such as unemployment in traditional high-carbon industries and a widening income gap. For example, as supply-side reform is implemented and overcapacity is reduced, the number of employees in the coal industry fell from about 4.5 million in 2015 to about 2.6 million in 2020, and may be halved again by 2030.16 In the short term, the process of achieving the “dual carbon” goals will accelerate job transfer in these industries and increase employment pressure. In view of this, more jobs must be created in services, renewable energy and other alternative industries to offset the negative impact such as unemployment caused by the exit of high-carbon industries. According to the research report by the International Renewable Energy Agency (IRENA), the number of employees in China’s renewable energy sector reached 4.36 million in 2019, with an upward trend.17 However, it should be noted that emerging industries such as the renewable energy sector differ from traditional high-carbon industries in the requirements for labor quality and technology. In the course of the job transfer, it is necessary to help the unemployed adapt to new jobs through good vocational and technical training.

16

“The Impact of Coal-fired Power Generation and Coal Transition on Employment”, cnenergynews. cn, August 5, 2020. 17 International Renewable Energy Agency: Renewable Energy and Jobs Annual Review (2020), International Renewable Energy Agency 2020.

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We can draw on advanced experience at home and abroad to establish a comprehensive fair and just transformation policy at the levels such as individuals, enterprises, regions and state, such as providing basic medical care and social insurance for laid-off employees; providing severance funds for employees who retire early or voluntarily resign to help them survive the transitional period of unemployment; providing training opportunities and entrepreneurial aid to employees who require reemployment; formulating market mechanism-based debt relief and replacement schemes for enterprises in difficulty, supplemented by government assistance, and helping enterprises solve pension difficulties; granting preferential credit to enterprises that hire unemployed employees; and so on.18

3.2 Synergy Between Achieving the Carbon Peaking and Carbon Neutrality Goals and Regional Development As China is a vast country, industrial structure, economic development, technological advance, resource endowments, bases of carbon emission, etc. vary greatly from region to region. The carbon peaking and carbon neutrality tasks will have an impact on different regions and different industries to varying degrees, and may even increase the imbalance of development among regions. It may be relatively easy to achieve the “dual carbon” goals in economically developed regions with a low proportion of the secondary industry, a high level of electrification for energy, and abundant high-level personnel, such as Beijing, Shanghai, Tianjin, Jiangsu, and Guangdong. These regions have a better capacity to adapt to “dual carbon” goals and promote the industrial structure improvement and technological progress, as well as a better capacity to translate the huge demand for green and low-carbon products as well as services in society into a driving force for building new low-carbon industries and providing low-carbon products and services. Another type is provinces with abundant resources, such as Shanxi, Inner Mongolia, and Shaanxi. These regions are rich in fossil energy resources, and the fossil fuel-based industry has been the pillar of the local economy, with a great many upstream and downstream enterprises and related employees. However, these regions, facing problems such as a slowdown in economic development and large emissions of greenhouse gases and pollutants, are highly dependent on traditional energy, and the sunk cost of high-carbon assets is high. It is difficult for them to conduct the transformation of low- carbon and zero-carbon technologies, and the task of emission reduction is more arduous. The “dual carbon” goals have a greater economic and social impact on such regions. Therefore, achieving the “dual carbon” goals nationwide does not mean that all provinces (autonomous regions and municipalities directly under the central government) or even all cities and counties achieve the goals simultaneously. The plans 18

Jing Wenna (2018).

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for achieving carbon peaking and carbon neutrality should be formulated scientifically in light of the local economic development level, development stage, resource endowments and carbon emissions, ensuring coordinated development of the local economy, society, resources and the environment. Because greenhouse gas emissions implicit in power transmission and merchandise trade are characterized by mobility across regions, we can rationally use regional differences in resource endowments, complementary industrial chains, technological comparative advantages, ecological environment, etc. to design regionally coordinated emission reduction schemes, jointly reduce the impact of transition, bring into play the complementary advantages of regional entities, and invigorate synergy to reduce carbon emissions.19 Developed regions with high emission reduction costs and small potential for emission reduction as well as related enterprises can be encouraged to invest in and build renewable energy production bases in areas with rich resources such as wind power and photovoltaic power, and implement point-topoint targeted procurement of renewable-based electricity to increase the potential for carbon reductions. Regions rich in wind and solar power resources can be encouraged to take advantage of low-carbon renewable energy to take the lead in carbon peaking. For example, Qinghai, a national demonstration province for clean energy, has the obvious advantage of being the first to achieve carbon peaking. In regions highly dependent on traditional energy, such as Shanxi and Shaanxi, it is necessary to make overall planning, formulate a roadmap for the development and use of renewable energy in place of fossil energy, and achieve carbon peaking and carbon neutrality under the premise of minimizing the impact on society, economy and social equity.

4 Synergy Between Carbon Peaking and Carbon Neutrality and Ecological Environment Governance China faces the dual pressures of environmental protection and climate change mitigation. Although the carbon peaking and carbon neutrality goals have just been put on the agenda, discussions on a concerted approach to environmental pollution and carbon reduction began long ago. The response to climate change is closely related to traditional eco-environmental protection. As the two have the same root causes in many respects, treatment measures are interrelated, and the governance results also affect each other. Due to limited resources, it is necessary to make overall planning for response to climate change and eco- environmental protection, and adopt a coordinated approach to carbon reduction and atmospheric environment, water environment, solid waste disposal as well as ecosystem. The Guiding Opinions on Coordinating and Strengthening Work Related to Response to Climate Change and Eco-environmental Protection (HZH [2021] No. 4) issued by the Ministry of Ecology and Environment put forward principled requirements in this regard. 19

Xing Hua (2015).

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4.1 Synergistic emission reduction of carbon and air pollutants “Synergistic emission reduction” refers to the simultaneous reduction of local atmospheric pollutants (such as SO2 , NOx, PM, CO, VOC and O3 ) and greenhouse gases (CO2 , CH4 , and N2 O) through measures and methods with a synergistic effect.20 Atmospheric pollutants and greenhouse gases can be reduced simultaneously because both are mostly caused by fossil fuel combustion. According to the findings of research, carbon reduction measures such as energy conservation have the effect of synergistic emission reduction of local atmospheric pollutants by cutting down fossil energy consumption. Measures to improve the energy structure for the purpose of reducing atmospheric pollutants can also reduce greenhouse gas emissions. These researches on evaluating the synergistic benefit have been widely conducted in key industries such as electric power, steel, and transportation, as well as in provinces and cities such as Urumqi, Tangshan, and Hainan Province. However, in practice, not all carbon emission reduction measures help to reduce atmospheric pollutants, and not all measures to control atmospheric pollutants help to reduce carbon emissions. There is “non-coordination” to some extent. For example, carbon capture and storage (CCS) technology increases the indirect emission of atmospheric pollutants because of the increased use of electricity; terminal pollution control technologies, such as desulfurization and denitrification technologies, increase direct and indirect carbon emissions due to the increased use of related materials and electricity.21 Therefore, we should pay attention to the coordination of the two goals, seeking coordinated reductions of greenhouse gases and local atmospheric pollutants, while minimizing mutual conflict. At present, coordinated reductions of greenhouse gases and atmospheric pollutants are primarily achieved through structural emission reduction and large-scale emission reductions, as well as some front-end or mid-end emission reduction technologies.22 Structural emission reduction refers to the practice of improving the existing energy structure to reduce the use of fossil energy and increase the proportion of clean energy. In the power industry, for example, closing down backward and inefficient small coal-fired power plants, and using advanced supercritical, ultrasupercritical, and Integrated Gasification Combined Cycle (IGCC) can improve the energy efficiency of power generation and reduce carbon emissions per unit of power generation of course, but the potential for carbon emission reduction is limited, and the obstacles to carbon neutrality cannot be fundamentally removed. The replacement of thermal power generation with renewable energy-based power generation and nuclear power can fundamentally achieve zero carbon emission. The practice of large- scale emission reduction focuses on reducing the output and consumption 20

Mao Xianqiang et al. (2012). Mao Xianqiang et al. (2021). 22 Mao Xianqiang et al. (2011). 21

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of high-carbon and highly polluting products, and achieves coordinated emission reduction by eliminating the production capacity of high-carbon industries.23 For example, measures for extending the service life of infrastructure and reducing the consumption of steel and cement can help reduce emissions on a large scale. For technology-based emission reduction measures, the front- end and mid-end control measures as well as technical measures such as crude fuel substitution have a more obvious synergy, such as coal dressing and heat treatment of coal in the thermal power industry, and short-process steelmaking in the steel industry.

4.2 Synergistic emission reduction of Carbon, Wastewater and Solid Waste Water pollution treatment is a key way to improve environmental quality. Water pollution treatment not only requires heavy input of capital, manpower and material resources, but also carries hidden costs such as carbon emissions. For example, carbon emissions from wastewater treatment include both direct and indirect emissions. Direct emissions include greenhouse gas emissions generated and escaped during the conveyance and treatment of wastewater, as well as greenhouse gas emissions from the decomposition of residual substances. Indirect emissions refer to carbon emissions implicit in electricity consumption, energy consumption, etc. during the wastewater treatment process.24 Solid waste treatment will also release carbon emissions. For example, household waste can be treated in three ways: sanitary landfill, composting and incinerationbased power generation.25 Sanitary landfill technology can easily process different types of waste, but this technology requires the occupation of extensive land. Moreover, waste fermentation in the landfill process generates a great deal of greenhouse gases such as methane. Composting technology refers to the microbial decomposition of waste. If not handled properly, it will cause a leakage of greenhouse gases. For incineration-based power generation technology, waste is treated at high temperatures and the resulting heat energy is recycled to generate electricity. This technology can also avoid the problem of greenhouse gas escape such as methane, as landfill does. However, waste incineration requires the addition of related accessories, which will emit greenhouse gases and pollutants such as dioxin and mercury, which will have a negative impact on the eco-environment. Attention should be paid to this problem. Therefore, achieving the synergy between carbon emission reduction and wastewater and solid waste disposal is also a key issue in the process of carbon peaking and carbon neutrality. In the treatment of wastewater and solid waste, direct carbon emissions can be reduced by improving process and management level, and indirect 23

Li Xin et al. (2019). Wang Hongchen (2017). 25 Tang Ying (2015). 24

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carbon emissions can be cut by increasing the share of zero-carbon electricity.26 For example, methane can be recovered in sewage treatment plants, and sludge digestion and treatment projects can be launched; anaerobic fermentation processes can be used in the treatment of high-concentration organic industrial wastewater; biogas can be recovered for power and energy supply in the plants, thus reducing carbon emissions while treating wastewater. Appropriate low-carbon water treatment technology can be used to reduce external carbon sources.27 The roofs of sewage treatment plants can also be equipped with solar photovoltaic facilities to increase the utilization of clean energy. In the process of implementing municipal household waste incinerationbased power generation and reduction of greenhouse gas emissions, incineration efficiency can be improved through waste sorting. The generation and emission of dioxin can be reduced by means of pretreatment before furnace processing, 3T+E decomposition (combustion temperature no less than 850°C, the gas residence time no less than two seconds, increased turbulent combustion, and oxygen control), low temperature synthesis control outside furnace (controlling the regeneration interval of dioxin, and preventing ash accumulation on the heating surface) and end emission control (activated carbon adsorption and SCR).28 Indirect emissions of greenhouse gases can also be reduced by connecting renewable energy such as photovoltaic and wind power to the grid.

4.3 The Synergy Between the Carbon Peaking and Carbon Neutrality Goals and Ecological Governance While reiterating China’s “dual carbon” goals at the Climate Ambition Summit held in December 2020, President Xi Jinping also said that by 2030, China’s forest stock volume will increase by six billion square meters from the 2005 level.29 In addition to traditional forest carbon sinks, or absorbing carbon dioxide from the atmosphere through afforestation, and turning marginal farmland into forests, ecological carbon sinks also include the absorption of carbon emissions through grasslands, wetlands, oceans and other ecosystems. Ecological carbon sinks stress the integrity of ecosystems and their impact on the global carbon balance.30 In the process of achieving the “dual carbon” goals, increasing carbon sinks and reducing emissions are equally important. Ecological conservation and carbon emission reduction have the same goals, and can be achieved in a coordinated manner. We should fully cultivate and use the capacity of forests, grasslands, oceans, wetlands and soils for carbon sequestration, and do a good job of taking a holistic approach to protecting and restoring mountains, rivers, forests, farmlands, lakes, and grasslands, land consolidation, mine 26

Xilong Yao et al. (2019). Zheng Siwei et al. (2019). 28 Zhou Fanglei (2019). 29 Xi Jinping (2020). 30 Zhang Shougong (2021). 27

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site rehabilitation and ecological restoration, and ocean protection and restoration, which can improve the ecosystems as carbon sinks and help achieve the “dual carbon” goals. For example, the topsoil and surface vegetation in coal mining areas are often severely degraded, reducing the capacity of ecosystems for carbon sequestration. Stacked Coal gangue caused by coal mining can undergo oxidation reaction and spontaneous combustion, spewing out carbon dioxide.31 Therefore, ecological restoration in mining areas can improve the capacity of the ecosystem for carbon sequestration, avoid unnecessary carbon emissions, and achieve synergy between carbon emission reduction and environmental governance. As the process of carbon peaking and carbon neutrality advances, carbon sink construction will bring about a continuous improvement in the eco-environment.

4.4 Prevent Potential Eco-environmental Risks Caused by Measures for Low-carbon Development Developing renewable energy to replace fossil fuels is a necessary measure to achieve the “dual carbon” goals. However, because the energy density of solar and wind power is small, a large energy collection area is required. Large- scale construction of solar and wind farms with solar photovoltaic panels and wind turbines will change the properties of the earth surface, and may also alter the local climate through the process of land-air interaction.32 Wind farms may destroy animal habitats during operation, and cause bird collisions and the negative eco-environmental impacts such as noise and visual eyesore.33 In the case of hydropower, extensive infrastructure construction will destroy the landscape, and water interception and diversion will lead to spatial changes in the distribution of water, resulting in degraded ecosystems in downstream river sections.34 Pumped storage power stations have high topographic requirements for their siting, and their construction will inevitably and negatively affect the local natural and ecological environment, and even the lives of local residents.35 Carbon capture and storage (CCS) technology is a strategic emerging technology that gives consideration to energy utilization, sustainable economic development and largescale reduction of carbon dioxide emissions.36 It is divided into three stages: carbon dioxide capture, carbon dioxide transportation and carbon dioxide storage. The largescale application of CCS technology poses a potential risk of eco-environmental impact. For example, extra energy is consumed to ensure its normal operation in the process of carbon dioxide capture, causing atmospheric pollutants such as nitrogen oxides (NOx) and sulfur dioxide as well as solid waste. Leakage may occur during 31

Yan Meifang et al. (2019). Liang Hong et al. (2020). 33 Jiang Junxia et al. (2019). 34 Pang Mingyue et al. (2015). 35 Yigang Kong et al. (2017). 36 Wei Feng et al. (2015). 32

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the transportation of carbon dioxide. Carbon dioxide stored underground may have hydrogeological and ecosystem impacts, including the contamination of groundwater during carbon dioxide injection and the acidification of saline water in storage formations.37 If the amount and concentration of carbon dioxide leaked into the soil increase, the growth of crops will be suppressed.38 Nuclear energy, a clean, efficient energy source, is important for achieving the “dual carbon” goals. However, from the perspective of the fuel chain, the industrial production process will emit greenhouse gases and local pollutants.39 Part of artificial radionuclides produced during the operation of nuclear power plants will also be released into the environment.40 Nuclear wastewater and nuclear waste are also issues that must be considered in the development of nuclear power plants. For eco-environmental risks that may be posed by carbon peaking and carbon neutrality measures, it is necessary to conduct a full eco- environmental impact assessment in the implementation process, to consider measures including scientific planning and reasonable siting, and to put forward countermeasures to deal with risks and reduce the impact. At the same time, research and development can be conducted to improve the advanced, safe and stable technologies for carbon reduction, so as to prevent adverse effects.

5 Synergy of Carbon Peaking and Carbon Neutrality with Energy Security Objectives The key to achieving the “dual carbon” goals is the improvement of the energy structure, particularly the replacement of traditional fossil energy with zero-carbon energy. Energy security issues cannot be overlooked in the process of the energy transition. The key to achieving “carbon reduction without compromising safety” is to solve the problem of intermittent and unstable supply of zero-carbon energy, and ensure the safe production of zero-carbon energy.

5.1 The Synergy Between the Carbon Peaking and Carbon Neutrality Goals and Ensuring Energy Stability The “dual carbon” goals raise higher demands for the development of electricity based on renewable energy such as wind power and photovoltaic power. Studies forecast that in order to achieve the “dual carbon” goals, China’s total installed capacity of electricity is expected to reach 3.8 billion kilowatts, 7.5 billion kilowatts 37

Liu Lancui et al. (2010). Han Yaojie et al. (2019). 39 Wu Yican et al. (2018). 40 Jiang Ziying et al. (2008). 38

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and 8 billion kilowatts in 2030, 2050 and 2060 respectively, of which the installed capacity of clean energy is expected to reach 2.57 billion kilowatts, 6.87 billion kilowatts, and 7.68 billion kilowatts respectively. Clean energy accounts for more than 96% of the installed capacity and generating capacity in 2060.41 However, it should be noted that although clean energy-based electricity can reduce greenhouse gas emissions, clean energy-based electricity such as solar power and wind power is characterized by being intermittent and unstable, and are susceptible to time and climate interference. Photovoltaic power generation of the same installed capacity has the highest generating capacity at noon but generates no power at night. Wind power is affected by the force of the wind, etc., and the output load is also volatile. The large-scale connection of wind and photovoltaic power to the grid undermines the stability of the power grid. In the event of long-term adverse weather such as windless or rainy weather, the power supply will be interrupted, and the power grid may even collapse. For example, in the American state of Texas, wind power and solar power account for a considerable share in addition to power generation based on natural gas, coal and nuclear power, with wind power generation accounting for 22.9%, and solar power generation 2.2% in 2020. In February 2021, Texas was hit by extremely cold weather. Facilities such as wind turbines were frozen due to several consecutive days of freezing rain and snowfall. As a result, generating capacity of wind power fell by 60%, and solar power generation also fell by 68% because photovoltaic panels were covered with ice and snow.42 At present, the principal feasible way to improve the stability of clean energybased electricity is to develop renewable energy-based power plus energy storage technology, including photovoltaic power—energy storage—combined heat and power technology,43 superconducting energy storage technology,44 supercapacitor plus battery or storage of hydrogen and other energy sources, a hybrid energy storage system,45 wind and solar power + pumped storage technology, etc. In fact, traditional thermal power generation technology is quite mature, and plays a role as the base load in the power system. If the capacity of coal-fired power generation is eliminated in a “one-size-fits-all” manner, it will cause too low an investment in the coal power industry, and too fast an exit. If renewable energy cannot effectively fill the gap left by the phase-out of traditional energy in the short term, it will cause regional and intermittent energy shortages. Therefore, we should take a holistic and step-by-step approach when reducing the share of fossil energy and increasing the share of renewable energy. We should consider making a flexible transformation of coal-fired power plants to help solve the problem of unstable power supply caused by the large-scale connection of renewable energy sources such as wind and photovoltaic power to the grids. In light of the characteristics of each 41 “Research Report on China Achieving Carbon Neutrality before 2060”, Global Energy Interconnection Development and Cooperation Organization, March 2021. 42 Fan Xuqiang et al. (2021). 43 Zhang Yuman et al. (2020). 44 Guo Wenyong et al. (2019). 45 Jiang Runzhou et al. (2015).

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energy source, we should make overall plans according to resource endowments, and ensure energy supply at the optimal cost under the premise of meeting the social energy demand. For example, we use nuclear power and wind power as the base load power, while improving the capacity to regulate power grids, so that zero-carbon power generation based on wind power, photovoltaic power, nuclear power, etc. and coal-fired power generation with flexible shaving can complement for stable and safe power supply. The importance of grid regulation is also manifested in its spatial allocation of clean energy resources. Clean energy is unevenly distributed. Compared with eastern and southern China, the western and northern regions have a smaller population, but have more resource endowments. For example, the potential of wind power resources at a height of 70 m in Inner Mongolia accounts for 56.9% of the country’s total, and the potential of solar energy resources accounts for 34.1%. The population of Inner Mongolia in 2019 is only 25.4 million. In Henan Province, with a population of 96.4 million in 2019, the potential of its wind and solar power resources only accounts for 0.15% and 0.29%, respectively. Therefore, it is of important significance to achieve “dual carbon” goals to improve the regulation of clean energy power, solve the problem of spatial and time allocation of clean energy, increase the utilization of clean energy, and improve the stable supply of zero carbon energy sources through the construction of “power grid + energy storage” infrastructure.46 Accelerating the construction of power grids featuring UHV, and strengthening the interconnection of power grids between China and neighboring countries will help achieve the full utilization of renewable energy.

5.2 Synergy Between the Carbon Peaking and Carbon Neutrality Goals and Work Safety Because renewable energy is unstable, energy storage technology is needed, so that the development of renewable energy will drive the development of the energy storage sector. Energy storage serves the functions such as peak shaving, peak load and frequency regulation, improving power quality, stabilizing new energy output, and promoting the consumption of new energy. However, energy storage technology is not yet mature, and safety hazards are a constraint on the development of renewable energy. In 2021, an explosion accident occurred at the energy storage power station of Beijing Guoxuan Fuweisi Photovoltaic- Storage-Charging Technology Co., Ltd.47 From 2017 to 2020, a total of 29 fire accidents occurred at electrochemical energy storage power stations in South Korea. After analyzing typical safety accidents at electrochemical energy storage power stations in China, South Korea and the United States, some studies found that flammable lithium batteries are the primary cause 46

Zhang Zhenyu et al. (2019). “Harrowing accident! Beijing energy storage power station exploded, too high a price for the industry!” National energy information platform, April 20, 2021. 47

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of energy storage safety accidents, accompanied by thermal runaway. The accident areas are often not batteries, but electrical accidents.48 As photovoltaic power generation technology is applied to more scenarios, it also shows some safety risks. For example, on April 19, 2018, a fire broke out at a ground photovoltaic power station in Tongling, Anhui Province; on February 2, 2020, a fire erupted on the hillside where the solar PV power generation project in Jishan County, Yuncheng City, Shanxi Province, was located.49 Nuclear power is characterized by low greenhouse gas emissions and high energy, but previous safety accidents also attract widespread attention. 270,000 people developed cancer and 93,000 people were killed as a result of the 1986 Chernobyl nuclear disaster. It is estimated that it will take 800 years for radioactive elements exposed by nuclear leakage to be completely resolved. In 2011, the Fukushima Daiichi Nuclear Accident in Japan triggered by the tsunami resulted in the mutation of local animals and plants. In 2021, the Japanese government decided to discharge nuclear wastewater from the Fukushima Daiichi Nuclear Power Plant into the ocean after dilution processing, but the radioactive elements in the nuclear wastewater that are hard to be treated may have a negative impact on human health and ecosystems through food chains, biological chains, etc. This prompted widespread opposition from neighboring countries. These are cautionary tales. They tell us that we must raise safety awareness, improve the management rules and regulations, tighten safety management, and remove potential safety hazards as we develop low-carbon energy.

6 Carbon Peaking and Carbon Neutrality’s Synergy with the Preservation of Traditional Culture and Way of Life The proposed carbon peaking and carbon neutrality goals will thoroughly reconstruct the industrial pattern and infrastructure distribution based on fossil fuels, accompanied by the gradual disappearance of cultural features of the fossil fuel era, such as steam locomotives, diesel locomotives, and green-colored trains that trudge slowly through green mountains and across rivers, factory and mining dormitories reminiscent of group living, beautiful fireworks on the Spring Festival, delicious cured meat and fish, and so on. At the same time, traditional high- carbon industrial knowledge and technologies will have little use or may become obsolete, such as cokebased steelmaking technology, coal-fired power generation technology, and internal combustion engines. Such knowledge and technologies testify to the glory of industrial development as well as scientific and technological development. Will various industrial relics, their industrial knowledge and technology, as well as traditional 48

An Kun et al. (2020). “Safety of photovoltaic power plants requires prompt attention”, National energy information platform, March 1, 2021.

49

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culture and life customs contained in them be completely abandoned, or will they be appropriately preserved? This issue deserves our consideration. The experience of European and American countries in the transformation of industrial bases is of a reference value. The Ruhr region was the steel and coal capital of Germany, with an output value accounting for one-third of Germany’s GDP, its steel output 70% of the country’s total, and its coal output 80% of the country’s total. Alongside the rise of the world’s oil and gas sector, the coal industry in the Ruhr region gradually declined. Due to the global division of labor, the steel manufacturing industry has largely faded into history, and the smelting and coal-based chemical engineering industry is also unsustainable. During the arduous economic transition and structural improvement, the Ruhr region was planned and designed in a holistic manner, and a slew of transformation programs were launched, such as the remediation of the Emscher River, the restoration of the industrial landscape, reuse of abandoned industrial facilities, and construction of research centers. Local industrial cultural heritage, and a wealth of industrial relics such as blast furnaces, gas tanks, derricks, and factory buildings have been preserved and transformed into museums, exhibition halls, opera houses and even areas for working and living. For example, in the Landschaftspark Duisburg-Nord, an abandoned gas tank has been converted into a diving training base, and the façade of some tall concrete buildings is used for climbing purposes. In Emscher Park, abandoned factories and facilities have been turned into museums and landscape parks; pipes that transported miners hundreds of feet underground as well as other machines have been converted into exhibition rooms; gas tanks have been converted into cultural event areas as the venues for concerts, get-togethers, artistic performances and conferences. As a result of the renewal of the industrial heritage, the Ruhr region has now become the “cultural capital of Europe”. Some Chinese cities with old industrial bases are also exploring new ways to conserve and utilize industrial heritage, and work to bring into use the cultural connotation of industrial heritage by transforming it into a cultural and creative park that brings together urban memory, knowledge diffusion, creative and cultural services, and recreation. For example, Chongqing Municipality built the Chongqing Industrial Museum on the basis of the original factories of Chongqing Iron and Steel. The Chongqing Industrial Museum comprises the main exhibition hall, the “Steel Soul” hall, the Industrial Heritage Park, etc. The main exhibition hall takes advantage of the columns and beams of previous factory buildings. The “Steel Soul” hall breathes new life into “Former Site of Anti-War Weapons Industry in Chongqing - Steelworks Relocation Association Production Workshop”, which is included on the seventh list of important heritage sites under state protection. The Industrial Heritage Park showcases precious industrial equipment as well as several themed sculptures, artistic installations and statues of industrial pioneers. On the one hand, Chongqing Industrial Museum leverages a full variety of industrial equipment objects to fully showcase the revitalization of the national industry after the opening up of Chongqing, as well as the contribution made by the Chongqing industry to China’s war of resistance,

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national economic recovery, Chongqing’s urbanization, and China’s industrialization. On the other hand, it also showcases the knowledge and information contained in industrial heritage such as technological processes and technical principles. The fossil fuel era is a key part of human civilization, representing a transition from an agrarian society in which people rely on nature and are self- sufficient to an industrial society with a further division of labor, simultaneous labor, centralized labor organization, large-scale production and intensive economic development. As a key part of human cultural inheritance, it contains the human experience in understanding, transforming and using nature, and is a vehicle of deep sentiments of humanity. At the same time, because there are still uncertainties in the future development of mankind, the appropriate preservation and maintenance of fossil energyrelated knowledge, technology, skills, equipment, and infrastructure will help to deal with risks in the event of extreme situations. Therefore, as decarbonization gradually deepens, we should also preserve the industrial civilization relics left in the era of fossil fuels, and use this industrial heritage to preserve the knowledge of traditional industrial technologies.

References An Kun, Tian Zheng, Zhao Jin, et al., “Brief Analysis of the Safety Hazards and Solutions for the Construction of Electrochemical Energy Storage Power Stations”, Electrical & Energy Management Technology, No. 10, 2020. Fan Xuqiang, Wu Mouyuan, Chen Jiaru, et al., “Lesson from the Texas Power Outage in the United States for China’s Energy Security”, International Petroleum Economics, No. 3, 2021. Guo Wenyong, Cai Fuyu, Zhao Chuang, et al., “Application of Superconducting Energy Storage Technologies to Renewable Energy and its Prospects”, Automation of Electric Power Systems, No. 8, 2019. Han Yaojie, Zhang Xueyan, Ma Xin, et al., “Effects of Leakage of Geologically Sequestrated CO2 on Root Morphology of Corn”, Acta Ecologica Sinica, No. 20, 2019. He Shaojia, “Global View on Carbon Neutral Technology Development”, iyiou.com, June 7, 2021. Hu An’gang, “China’s Goal of Achieving carbon peaking by 2030 and Main Ways of Realization”, Journal of Beijing University of Technology (Social Sciences Edition), No. 3, 2021. Jiang Junxia, Yang Liwei, Li Zhenchao, et al., “Progress of Research on the Impact of Wind Farms on Climate and Environment”, Advances in Earth Science, No. 10, 2019. Jiang Runzhou, Qiu Xiaoyan, Chen Guangtang, “Method of Optimal Configuration of Hybrid Energy Storage System for Wind Farms”, Proceedings of the CSU-EPSA, No. 1, 2015. Jiang Ziying, Pan Ziqiang, Cheng Jianping, “A Comparative Study of the External Costs of CoalFired Power Chains and Nuclear Power Chains in China”, Annual Report of China Institute of Atomic Energy, 2008. Jing Wenna, “Addressing Coal Overcapacity: ‘Just Transition’ in Maintaining Employment”, China Economic Herald, June 21, 2018. Li Xin, Lu Lu, Mu Xianzhong, et al., “Analysis of Medium- and Long-term Emission Reduction Potential in Steel Industry in Beijing-Tianjin-Hebei Region Based on LEAP Model”, Research of Environmental Sciences, No. 3, 2019. Liang Hong, Wei Ke, Ma Jiao, “Possible Climatic Effects of the Construction of Large-scale Solar and Wind Power Farms in Northwest China”, Climatic and Environmental Research, No. 1, 2020.

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Liu Junling, Xia Houqinrui, Wang Ke, et al., “Research on the Medium- and Long-term Low-Carbon Development Path of China’s Industrial Sector”, China Soft Science, No. 11, 2019. Liu Lancui, Cao Dong, Wang Jinnan, “Potential Environmental Impact of Carbon Capture and Storage Technology and Suggested Countermeasures”, Advances in Climate Change Research, No. 4, 2010. Liu Zhenya, “The Fundamental Approach to Achieving Emission Peak and Carbon Neutrality,” Study Times, March 15, 2021. Mao Xianqiang, Xing Youkai, Hu Tao, et al., “Analysis of the Environmental and Economic Path for Coordinated Reduction of Sulfur, Nitrogen and Carbon Emissions in China’s Power Industry”, China Environmental Science, No. 4, 2012. Mao Xianqiang, Zeng An, Hu Tao, et al., “Study of Coordinated Control Effect Assessment of Technological Measures for Emissions Reduction”, China Population Resources and Environment, No. 12, 2011. Mao Xianqiang, Zeng An, Xing Youkai, et al., “From Philosophy to Action: A Review of Researches on the Synergy and Coordinated Control of Greenhouse Gases and Local Pollutant Emission Reduction”, Advances in Climate Change Research, No. 3, 2021. Pang Mingyue, Zhang Lixiao, Wang Changbo, “Research on the Ecological Impact of Small Hydropower Stations in China Based on Energy Analysis”, Acta Ecologica Sinica, No. 8, 2015. Ping An Securities Research Institute, “Green Economy Report (I) Carbon Neutrality: Four- Decade Investment Blueprint is Being Implemented,” daqi.bjx.com.cn, March 8, 2021. Tang Ying, “Research on pollutant emission control in waste-to-power process”, North China Electric Power University, March 2015. Wang Hongchen, “Carbon Emission Reduction Path and Potential for China’s Urban Sewage Treatment Industry”, Water & Wastewater Engineering, No. 3, 2017. Wei Feng, Jiang Xian, Zhou Hong, et al., “ Global Patent Development Trend of MEA Decarbonization Technology Based on CCS”, Chemical Industry and Engineering Progress, No. 12, 2015. Wu Di, Zhang Ying, and Kang Junjie, “China Has the Capacity to Move Faster Away from Coal-fired Power Generation”, Caijing, March 22, 2021. Wu Yican, Wang Minghuang, Fu Xuewei, et al., “Preliminary Research on the Impact of Nuclear Energy on Global Warming and Human Health”, Chinese Journal of Nuclear Science and Engineering, No. 3, 2018. Xi Jinping, “Building on Past Achievements and Launching a New Journey for Global Climate Actions: Speech at the Climate Ambition Summit”, People’s Daily, December 13, 2020. Xilong Yao, Zhi Guo, Yang Liu et al., Reduction Potential of GHG Emissions from Municipal Solid Waste Incineration for Power Generation in Beijing”, Journal of Cleaner Production, Volume 241, 2019. Xing Hua, “Research on the Vertical Embedded Governance Mechanism of Regional Cooperation in China: From the Perspective of Trading Costs”, Chinese Public Administration, No. 10, 2015. Yan Meifang, Wang Lu, Hao Cunzhong, et al., “Organic Carbon Effect of Ecologically Remediated Soil in Coal Waste Land”, Acta Ecologica Sinica, No. 5, 2019. Yigang Kong, Zhigang Kong, Zhiqi Liu, “Pumped Storage Power Stations in China: The Past, the Present, and the Future”, Renewable & Sustainable Energy Reviews, Volume 71, 2017. Zhang Shougong, “Enhancing the Capacity of Ecological Carbon Sinks”, People’s Daily, June 10, 2021. Zhang Yuman, Liu Xuezhi, Yan Zheng, et al., “Research on the Decomposition, Coordination and Optimization of Photovoltaic—Energy Storage—CHP Integrated Energy System”, Transactions of China Electrotechnical Society, No. 11, 2020. Zhang Zhenyu, Wang Wenzhuo, Wang Zhiwei, et al., “Analysis and Application of the Impact of Cross-region DC Transmission Mode on New Energy Consumption”, Automation of Electric Power Systems, No. 11, 2019.

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Zheng Siwei, Tang Wei, Yan Lanling, et al., “Research on Accounting and Emission Characteristics of Pollutant Removal and Coordinated Control of Greenhouse Gases in Urban Sewage Treatment Works”, Environmental Pollution & Control, No. 5, 2019. Zhou Fanglei, “Research On and Practice of Dioxin Control at Waste-to-Power Works”, Environmental Sanitation Engineering, No. 6, 2019.

Chapter 12

The Role of Carbon Sinks in Carbon Peaking and Carbon Neutrality Jinliang Li

Forestry is recognized as a crucial component in the global response to climate change. It is also an important part of national strategies to respond to climate change. The 2009 Central Forestry Work Conference pointed out that forestry occupies a special position in the response to climate change. To tackle climate change, the development of forestry must be used as a strategic choice. Therefore, forestry is important for addressing climate change, especially for achieving carbon peaking and carbon neutrality. In addition to forests, ecosystems such as oceans, grasslands, and wetlands are also of special significance for achieving the “dual carbon” goals. To attain the “dual carbon” goals, it is essential to comprehend carbon sinks, their role in achieving carbon peakings, and carbon neutrality, as well as to assess the current status, potential, and major avenues for enhancing carbon sinks.

1 Concept of Carbon Sinks and Their Significance 1.1 Carbon Sink Related Concepts Carbon sinks and carbon sources are concepts closely associated with climate change. The United Nations Framework Convention on Climate Change (UNFCCC) defines “sink” or “carbon sink” as any process, activity or mechanism which removes a greenhouse gas, an aerosol or a precursor of greenhouse gas from the atmosphere. In other words, a carbon sink is a process, activity, or mechanism that absorbs greenhouse gases such as carbon dioxide from the atmosphere. The UNFCCC defines “source” or “carbon source” as any process or activity which releases a greenhouse gas, an aerosol or a precursor of greenhouse gas into the atmosphere. In other words, J. Li (B) Beijing Institute of Green Resources Research (BIGR), Beijing, China e-mail: [email protected] © China Financial & Economic Publishing House 2023 G. Zhuang and H. Zhou (eds.), China’s Road to Carbon Peaking and Carbon Neutrality, https://doi.org/10.1007/978-981-99-3122-4_12

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a carbon source is a process, or activity that releases greenhouse gases such as carbon dioxide into the atmosphere. “Forest carbon sink” and “forestry carbon sink” are two basic concepts we often see. Forests carbon sinks refer to processes, activities or mechanisms by which forest ecosystems absorb carbon dioxide from the atmosphere and store it in vegetation and soil, thus reducing the concentration of carbon dioxide in the atmosphere. Forestry carbon sinks usually refers to processes, activities or mechanisms that stabilize and increase carbon sinks through forestry management activities such as forest protection, wetland management, desertification control, afforestation and reforestation, forest management, and management of harvesting forest products. Forest carbon sinks reflect the natural property of forests, while forestry carbon sink also includes policy management, and has more content than forest carbon sinks. In practice, forest carbon sinks and forestry carbon sinks can be used interchangeably, but forestry carbon sink is more commonly used.1

1.2 Carbon Sink Classification Methods To facilitate understanding and popularization, we divide carbon sinks into “three color” carbon sinks according to color: green carbon sinks, blue carbon sinks and white carbon sinks. The green carbon sink is the carbon sink created by green plants. It refers to processes, activities and mechanisms by which green plants absorb carbon dioxide from the atmosphere for carbon dioxide fixation, such as forests as carbon sinks, grassland as carbon sinks, and crop as carbon sinks. Terrestrial ecosystems featuring forests absorb about 28% of anthropogenic carbon emissions. The blue carbon sink refers to the carbon sink associated with the oceans, and is also known as the ocean carbon sink. It refers to processes, activities or mechanisms by which the oceans as well as ocean organisms absorb and fix greenhouse gases such as carbon dioxide. These carbon sinks include seagrass beds, mangroves, seaweed, corals, intertidal plants, etc. The oceans absorb about 26% of anthropogenic carbon emissions, becoming a huge carbon sink. Ocean carbon sinks are relatively stable. The white carbon sink refers to the carbon sink that is white in color. It refers to calcium carbonate for carbon sequestration through terrestrial ecosystems, such as karst landforms, coral reefs, shells and abalone shells formed by offshore aquaculture. However, the majority of white carbon sinks are naturally generated, and it is difficult for humans to intervene in the formation and generation of white carbon sinks. The actual output of various shells generated by anthropogenic offshore aquaculture is not large, and their influence on the slowdown of climate warming is not obvious.

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Nuyun Li (2016).

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1.3 The Importance of Carbon Sinks The issue of climate change characterized by global warming has become a significant crisis and grim challenge for all countries in the world, posing a direct threat to the survival and development of human society. For more than 200 years since the Industrial Revolution, the excessive use of fossil fuels and deforestation have emitted greenhouse gases such as carbon dioxide and methane, which aggravate the greenhouse effect. This is the root cause of climate warming. Therefore, two major ways to mitigate climate change are to increase greenhouse gas sinks or carbon sinks and reduce sources of greenhouse gas emissions. As we know, carbon sinks, particularly forestry as carbon sink, can remove anthropogenic carbon dioxide emitted into the atmosphere, convert carbon dioxide and water into organic matter by means of photosynthesis, and store them in plants and soils, thereby reducing the amount and concentration of carbon dioxide in the atmosphere. It plays a key role in mitigating climate warming. At the same time, it frees up space for emissions of greenhouse gases such as carbon dioxide by the industrial sector. In addition, forestry as carbon sink brings multiple benefits. Therefore, carbon sinks are of great and far-reaching significance in the fight against climate change.

2 The Role of Forestry as Carbon Sink in Carbon Peaking and Carbon Neutrality 2.1 The Significance of Forestry as Carbon Sink Forests are the largest carbon reservoirs and the most economical carbon absorbers among terrestrial ecosystems. Forests have the function of increasing carbon sinks, and the carbon content in forest plant biomass is about 50%. According to studies, every increase of forest stock by one cubic meter is equivalent to one ton of biomass, which absorbs and fixes about 1.83 tons of carbon dioxide. The IPCC estimates that about 2.48 trillion tons of carbon are stored in terrestrial ecosystems worldwide, including 1.15 trillion tons stored in forest ecosystems. Forest ecosystems worldwide absorb and store 90% of the world’s annual flows of atmospheric and earth surface carbon. Forests play a tremendous role in absorbing and storing carbon. Forests as carbon sinks play a key role in maintaining global ecological security and tackling climate change. Forestry has been included in the global response to climate change as an important component. Forestry is an important topic in climate negotiations and also the one on which consensus is the easiest to reach. The Fourth Assessment Report of the IPCC (2007) pointed out that forestry has many benefits and serves dual functions of climate change mitigation and adaptation, and that it is a key economically feasible initiative to increase carbon sinks and reduce emissions in the 30–50 years to come.

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The Paris Agreement, reached in December 2015 and entered into force on November 14, 2016, stipulates that the 195 Parties will participate in the global response to climate change in the form of “nationally determined contribution” after 2020. In accordance with the principle of common but differentiated responsibilities, developed countries should take the lead in reducing emissions and increasing financial, technological and other support to developing countries in support of the response to climate change. From 2023 onwards, an inventory of progress in the global response to climate change will be conducted every 5 years to urge countries to reduce carbon emissions. The long-term objective of the Paris Agreement is to limit the rise in average global temperatures to no more than 2°C above pre-industrial levels and strive for a rise in temperatures that doesn’t exceed 1.5°C. Participants are committed to reaching the global peaking of greenhouse gas emissions as soon as possible, and to striking a balance between anthropogenic emissions of greenhouse gases and carbon sinks (net zero emissions) in the second half of the twentyfirst century. More importantly, the Paris Agreement gives greater prominence to forestry by listing forestry provisions separately in Article V. According to the forest provisions, after 2020, various countries should take action to protect and enhance forest as carbon pools and carbon sinks, and developing countries are encouraged to implement and support “reducing emissions from deforestation and degradation and increasing carbon sinks through sustainable forest management initiative (REDD+)”. It also promotes an “integrated mechanism for climate change mitigation through forests for synergies and for sustainable forest management”. It stresses the focus on non-carbon benefits such as biodiversity conservation. At the UN Climate Action Summit held in September 2019, the UN SecretaryGeneral invited China and New Zealand to take the lead in Nature-Based Solutions (NbS). NbS are a key way to promote coordination in response to climate change, ecoenvironmental protection and sustainable development. In order to achieve the goal of holding global average temperature rise to below 2°C, the world is required to achieve the net zero emission target in the second or middle of the twenty-first century. We should harness the potential of Land Use, Land-Use Change, and Forestry (LULUCF) in carbon sinks to offset the remaining emissions from the carbon emission sectors. The Chinese government pays great attention to the key role of forestry in addressing climate change, particularly in achieving carbon peaking and carbon neutrality. Forestry is a key component of the national strategy to tackle climate change. The 2009 Central Forestry Work Conference stressed that forestry has an important position in implementing the strategy of sustainable development, a premier position in ecological conservation, a basic position in the development of the western region, and a special position in responding to climate change. To tackle climate change, the development of forestry must be used as a strategic choice. A specialized agency has been established to manage forestry as carbon sink as well as a forestry-based response to climate change. The State Forestry Administration (now National Forestry and Grassland Administration) has established Carbon Sink Office, the Energy Office (division level), and Climate Office (division level), as well as two departmental-level agencies: Asia–Pacific Network Center for Forest Restoration and Sustainable Management, and China Green Carbon Foundation. It

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participates in international climate negotiations on forest-related issues, formulates and issues relevant policies, organizes the preparation of methodologies for forestry carbon sink projects, guides the development of forestry carbon sink projects, organizes scientific research and capacity building, and launches over 60 forestry carbon neutral projects. Forestry as carbon sink has ecological, social and economic benefits, and increasingly attracts the attention of the international community. Forestry as carbon sink is a typical ecological product. Developing forestry and increasing forestry as carbon sink is of great significance for tackling climate change and achieving the “dual carbon” goals. It is mainly manifested in the following areas: First, it is conducive to the implementation of the Paris Agreement and the national strategic decision on carbon peaking and carbon neutrality, as well as the guiding principles of the 18th CPC National Congress report which proposes “providing more high-quality ecological products” and the 19th CPC National Congress report on ecological conservation and green development. Second, it helps to explore the path of turning “lucid waters and lush mountains” into “invaluable assets”, and promote the building of a beautiful China and green development. Third, it helps consolidate the gains in poverty alleviation and implement the national rural revitalization strategy.

2.2 The Role and Potential of Forestry as Carbon Sink in China 2.2.1

The Role of Forestry as Carbon Sink in China

The Chinese government attaches great importance to forestry as carbon sink, regarding the increase in forest-based carbon sinks as a key goal for China to deal with climate change. In 2009, the Chinese government promised the international community the target of controlling greenhouse gas emissions: by 2020, carbon dioxide emissions per unit of GDP will be reduced by 40% to 45% from the 2005 level; the proportion of non-fossil energy in primary energy consumption will reach about 15%; and the forest cover and stock volume will increase by 40 million hectares and 1.3 billion cubic meters respectively compared with 2005 (target of double increase for forestry). In 2015, the document on intended nationally determined contribution (NDC) submitted by the Chinese government to the UN states that by 2030 or so, China will achieve carbon peaking and strive to achieve it as soon as possible, and carbon dioxide emissions per unit of GDP will be reduced by 60% to 65% from the 2005 level; the proportion of non-fossil energy in primary energy consumption will reach about 20%; the forest stock volume will increase by 4.5 billion cubic meters from the 2005 level.2 2

The target of growth of forest stock volume by 4.5 billion cubic meters was completed ahead of schedule in 2019.

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The 13th Five-Year Plan issued in 2016 set the targets for controlling greenhouse gas emissions: carbon dioxide emissions per unit of GDP by 2020 will be reduced by 18% compared to the 2015 level; the proportion of non-fossil energy in primary energy consumption will increase from 12 to 15%; and the forest stock volume will increase from 15.1 billion cubic meters in 2010 to 16.5 billion cubic meters, with an average annual growth rate of 14%. President Xi Jinping announced a slew of new initiatives for China’s NDC at the Climate Ambition Summit held on December 12, 2020. By 2030, China’s carbon dioxide emissions per unit of GDP will be reduced by more than 65% from the 2005 level, the proportion of non-fossil energy in primary energy consumption will reach about 25%, the forest stock volume will increase by six billion cubic meters from the 2005 level, and the total installed capacity of wind and solar power generation will exceed 1.2 billion kilowatts. These show that increasing forests as carbon sinks plays a key role in meeting the national target of greenhouse gas emission control as well as the national response to climate change. According to the Working Guidance for Carbon Dioxide Peaking and Carbon Neutrality in Full and Faithful Implementation of the New Development Philosophy issued by the CPC Central Committee and the State Council, by 2025, the forest cover will reach 24.1% and the forest stock volume will reach 18 billion cubic meters; by 2030, the forest cover will reach about 25% and the forest stock volume will reach 19 billion cubic meters, carbon sink capacity will be further increased, and ecosystem capacity as carbon sinks will be consolidated, and the increase in the ecosystem as carbon sinks will be improved. The Action Plan for Carbon Dioxide Peaking Before 2030 also lists the initiative to consolidate carbon sink capacity as one of the “top ten initiatives for carbon peaking”. In summary, China’s climate change response strategy, the fulfillment of the Paris Agreement obligations and the national control of greenhouse gas emissions give a major mission to forestry, which plays an indispensable and key role as carbon sink.

2.2.2

The Potential of Forestry as Carbon Sink in China

China has made massive exploration, great efforts and great achievements in developing forestry and increasing forestry as a carbon sink. According to the results of the ninth National Forest Inventory in China, the forest area is 220 million hectares, the forest cover is 22.96%, the forest stock volume is 17.56 billion cubic meters, the man-made forest has an area of 79.5428 million hectares, the total biomass of forest vegetation is 18.802 billion tons, and the total carbon reserves reach 9.186 billion tons. When the People’s Republic of China was just founded, the forest cover was only 8.6%, and the forest area was only more than 80 million hectares. After over 70 years of afforestation, China’s forest cover has increased by over 1.6 times, reaching 23.04% by the end of 2020, and the forest area has reached 220 million hectares.3 3

Jun Zhu (2020).

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In 2019, China released the national inventory of greenhouse gases: the total greenhouse gas emissions in 2010 and 2014 were 10.544 billion tons of carbon dioxide equivalent and 12.301 billion tons of carbon dioxide equivalent, respectively. The annual greenhouse gas sinks for land use, land-use change and forestry were 993 million tons of carbon dioxide equivalent and 1.115 billion tons of carbon dioxide equivalent, respectively. After the deduction of carbon sinks (absorption sinks), China’s net greenhouse gas emissions in 2010 and 2014 were 9.551 billion tons of carbon dioxide equivalent and 11.186 billion tons of carbon dioxide equivalent. The ratio of carbon sinks offsetting carbon emissions was 9.42% and 9.34% (close to 10%) respectively. According to the data from China’s forest inventory, more than 60% of the existing forests in China are immature and young forests, and it is urgent to conduct forest tending and scientific management. Forest stock volume in China will be significantly increased if forest management is strengthened at the national and local levels, and lucid waters and lush mountains are turned into invaluable assets. Supposing that we increase the average national forest stock volume per hectare from the current 100 cubic meters to 300 cubic meters or more, as developed forestry countries have, and increase the average forest stock of man-made forests per hectare from the current 50 cubic meters to 300–800 cubic meters, we can significantly increase forest carbon sinks. Forests will bring ecological, economic and social benefits for the benefit of mankind while mitigating climate warming and helping to achieve the “dual carbon” goals. In addition to the national inventory of greenhouse gases, it is noteworthy that on October 28, 2020, Nature, a world-renowned academic journal, published a research paper entitled “Large Chinese land carbon sink estimated from atmospheric carbon dioxide data”, attracting widespread attention from domestic and foreign media including BBC,4 Xinhua News Agency, People’s Daily, people.cn, and China Green Times. According to a report by China Green Times on November 20, 2020, the latest findings of researches by scientists published in Nature show that from 2010 to 2016, China’s terrestrial ecosystems absorbed an average of some 1.11 billion tons of carbon per year (about 4.07 billion tons of carbon dioxide equivalent), which is equivalent to absorbing 45% of anthropogenic carbon emissions of the same period. This finding shows that the capacity of China’s terrestrial ecosystems as carbon sink was seriously underestimated. On the same day, the BBC reported on this achievement, praising the capacity of China’s forests as carbon sinks. It reported that China’s afforestation is conducive to carbon neutrality.5 The findings of this research were obtained by the Institute of Atmospheric Physics of the Chinese Academy of Sciences, in concert with China Meteorological Administration, the Survey Planning and Design Institute of National Forestry and Grassland Administration, the University of Edinburgh, National Aeronautics and Space Administration (NASA), etc. Based on field investigations and satellite observations, 4 5

BBC (2020). Zhaozhe Wu and Qing Li (2020).

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the study conducted an analysis using a new method of space-earth integration and found that the scale of carbon dioxide absorption by newly planted forests in two regions of China was underestimated. Carbon sinks in the two regions account for a little more than 35% of China’s overall terrestrial “carbon sinks”. The underestimated regions include Yunnan, Guizhou and Guangxi in southwest China, as well as those in northeast China, particularly Heilongjiang and Jilin. According to the IPCC research, the data from multi-source greenhouse gas observation and the meteorological inversion mode can visually and rapidly reflect the total greenhouse gases “emitted” or “retained” in the atmosphere. It is one of the important means to independently evaluate and verify the results of the national greenhouse gas emission inventory, and has also been included in the “2019 Refinement of the IPCC Guidelines for National Greenhouse Gas Inventories”. The World Meteorological Organization is also actively developing the Integrated Global Greenhouse Gas Information System to promote this program. The research team headed by Liu Yi said that the results of the study rely on the new surface observation data to some extent, but the existing observations are insufficient due to the great spatial–temporal changes in anthropogenic emissions and terrestrial ecosystems.6 In the future, the observation capabilities of satellites will be enhanced to compensate for the current inadequate observations, so as to establish a comprehensive observation system and provide more accurate data on the carbon budget. It provides technological support for China’s carbon neutrality goal. According to the aforesaid Nature article, ecosystem carbon sinks contribute to carbon peaking and carbon neutrality more than previously estimated. Given that this new methodology is different from the carbon sink accounting methodology stated in the IPCC Guidelines for National Greenhouse Gas Inventories, attention should be paid to scientific, feasible, reliable and uncertain research to provide a scientific basis for accurately calculating carbon sinks in terrestrial ecosystems.

2.3 The Main Ways to Increase Forestry as Carbon Sink in China According to the State Forestry Administration’s Forestry Action Plan on Climate Change7 and related research and practice results, the main ways to increase forestry as carbon sink in China are given below.

2.3.1

Scientifically Conduct Afforestation

Specific ways include: 6 7

Jia Ding (2020). National Forestry Administration (2010).

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(1) Vigorously promote nationwide voluntary tree-planting campaign. Governments at all levels should put nationwide voluntary tree-planting campaign on the agenda as an important topic, and implement the leadership responsibility system according to the Resolution on Launching a Nationwide Voluntary Tree-planting Campaign adopted by the National People’s Congress and the State Council’s Implementation Measures for the Nationwide Voluntary Tree-Planting Campaign. (2) Implement key afforestation projects and continuously expand the forest area. We should earnestly implement the natural forest protection project, the project of turning more marginal farmland into forests and grasslands, the BeijingTianjin sandstorm source control project, the Three-North Shelter forest project, the project of Yangtze River, Pearl River, and coastal shelter forests, the greening project of Taihang Mountains and the plains, the construction project of fastgrowing and high-yield forest bases in key areas, and the construction project of 20 million hectares of national reserve forest bases, thereby gradually enhancing the capacity of natural and man-made forests for carbon sink. (3) Accelerate the cultivation of precious tree species and timber forests. In conjunction with the national reserve forest project, industrial raw material forest bases, natural forest protection and the project of turning marginal cropland into the forest, we should establish timber forests and precious tree species cultivation bases in suitable areas, and improve the utilization of solar energy of forest stands as well as productivity of forest stands. 2.3.2

Develop Forestry Biomass Energy and Reduce Fossil Energy-Based Emissions

We implement an integrated project for the cultivation, processing and utilization of energy forests. The National Plan for Energy Forest Cultivation stipulates that it is necessary to make full use of marginal land such as mountainous areas and desert zones as well as wasteland suitable as forest, vigorously develop woody oil tree species, and build many oil-bearing energy forest demonstration bases for the purpose of producing biodiesels. Second, it is necessary to make full use of the shrub resources created by the projects of turning marginal cropland into forests and preventing and controlling desertification, as well as the residues from final felling, intermediate cuttings, and wood processing, and to process them into highefficiency solid briquette-fuels for direct combustion power generation or heating. Third, we must support the development of power generation technology based on high-efficiency biomass conversion, directional thermal pyrolysis technology and liquefied oil refining technology, and gradually form a pattern of “forest energy integration” featuring cultivation of raw materials, processing and production, sales, and technological development.

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Strengthen the Sustainable Management and Utilization of Forests

(1) Implement forest management projects. We should formulate and implement the “artificial commodity forest management plan” and “national management plan for key non-commercial forests”. At the national and provincial levels, we focus on implementing zoning policies and classified management, perform zoning according to different natural and geographical characteristics as well as economic conditions, and rationally designate non-commercial forests and commercial forests. Corresponding management policies are adopted for different types of forests in different regions. (2) Expand the area of closed hillsides to facilitate afforestation, and scientifically transform artificial pure forests. It is necessary to expand the area of closed hillsides to facilitate afforestation as much as possible and speed up the restoration of secondary forests. It is necessary to strengthen the operation and management of the existing man-made forests. We should avoid pure coniferous forest for multiple generations on the same forest land as far as possible. According to climate change scenarios, we should avoid creating large-scale artificial pure forests in the regions where climatic zone alternate, and strive to enhance the capacity of artificial pure forests to resist extreme and catastrophic weather. 2.3.4

Strengthen the Protection of Forest Resources

(1) Strengthen the management of forest harvesting. We strictly enforce the forest harvesting allowance system, and implement classified management of noncommercial forest and commercial forest harvesting. For non-commercial forests, we should improve the compensation fund system for forest ecological benefits to ensure that ecological benefits are brought into play in a stable and efficient manner. For commercial forests, particularly fast-growing and highyield timber forests and industrial raw material forests, we should relax control according to law and prioritize meeting the logging targets. (2) Strengthen the management of forest land occupation. We scientifically perform the “forestry development zoning” and formulate an “outline of the national plan for forest land protection and utilization”, and clarify the strategic direction of forestry development in different regions, as well as their leading functions and productivity distribution. We strengthen the protection and management of forest land, attach equal importance to forest land and cropland, adopt the strictest protection measures, and establish and improve the system of quota management of expropriated forest land, expert review and pre-examination. (3) Improve law enforcement capabilities regarding forestry. We gradually establish an administrative law enforcement system for forestry featuring clearly defined powers and responsibilities, standardized conduct, effective supervision, and strong guarantee; give full play to the role of forestry departments at

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all levels as well as their forest public security, forestry administrative inspection teams, timber inspection stations, forestry stations, and the contingent of forest rangers; and strengthen the protection of forest resources. We should step up law enforcement and crack down on various illegal acts that destroy forest resources according to law. (4) Improve the ability to prevent and control forest fires. Under the principle of “prevention first, active firefighting”, we adopt all-round measures to promote comprehensive prevention and control of forest fires, minimize the number of forest fires, and reduce losses caused by fires. (5) Step up the prevention and control of damage to forests caused by diseases, insects, rabbits and rats. Under the principle of “prevention first, scientific prevention and control, law-based governance, and health promotion”, we do a good job in the prevention and control of damage to forests caused by diseases, insects, rabbits and rats. The Regulations on the Prevention and Treatment of Forest Pests and Diseases are amended. 2.3.5

Develop a Healthy Forestry Industry

(1) Rationally develop and utilize biomass materials. It is necessary to boost the development and utilization of new biomass materials, biopharmaceuticals, etc. A plan for the development and utilization of biomass materials should be prepared. We should implement the Key Points of Forestry Policy, avoid low-level redundant development, control energy-intensive and highly polluting enterprises, and promote the development of a forestry circular economy. (2) Strengthen the efficient recycling of wood. We actively promote “energy saving, and consumption and emission reduction” in the wood industry as well as efficient recycling of wood resources, and vigorously develop the fine and deep wood processing industry. We develop the wood protection industry, improve the usability of wood, and extend the service life of wood products. 2.3.6

Strengthen the Restoration, Protection and Utilization of Wetlands

(1) Carry out rescue conservation and restoration of important wetlands. We focus on solving the issue of ecological water replenishment in important wetlands, control wetland pollutants in a planned manner, implement projects of turning marginal farmland (aquaculture) into marshes (beaches) in wetlands, expand the wetland area, and improve the quality of wetland ecosystems. According to the types of wetlands, the causes and extent of degradation, etc., we work to restore wetland vegetation in light of local conditions to improve the carbon storage of wetlands. (2) Conduct demonstrations of sustainable use of agriculture, animal husbandry and fisheries. We establish a national demonstration area for the comprehensive use

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of agriculture, animal husbandry and fishery resources; a wetland management and protection area for agricultural, animal husbandry and fishery development; a demonstration area for the efficient eco-agriculture model in southern artificial wetlands; and a demonstration base for the rational use of mangrove wetlands. We optimize coastal wetland-based aquaculture, implement ecological breeding, promote the sustainable use of wetlands for agriculture, animal husbandry and fishery purposes, and reduce greenhouse gas emissions caused by wetland destruction.

3 The Production and Trading Process of Forestry Carbon Sink Products 3.1 Classification of Forestry Carbon Sink Projects There are four main categories of forestry carbon sink projects at home and abroad: the UN Clean Development Mechanism (CDM) carbon sink afforestation project, the China Certified Emission Reduction (CCER) carbon sink project, the international Verified Carbon Standard (VCS) carbon sink project and other forestry carbon sink projects. According to the core technical measures of projects, forestry carbon sink projects fall into two categories: one is the afforestation project on the non-forest land, and the other is the forest management project on the forest land. Forestry carbon sink projects differ from ordinary afforestation and forest management projects. There are strict regulations for carbon sink afforestation projects in terms of design, implementation, monitoring, etc.

3.2 The Production Process of Forestry Carbon Sink Products How should we develop forestry carbon sink projects in an orderly manner to achieve market trading? According to the international and domestic rules as well as project practices, the development and trading in forestry carbon sink projects must be carried out according to procedures. This issue is illustrated using the CCER forestry and grassland carbon sink trading projects that are tradable in the Chinese carbon market and are of the greatest concern to the forestry sector. According to the common practices and relevant policies at home and abroad, the development procedures of CCER forestry carbon sink projects are summarized into seven steps: project design, project validation, project registration, project implementation, project monitoring, Project certification as well as CCER issuance (see Fig. 12.1).

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Fig. 12.1 CCER forestry carbon sink project development and trading procedures

The development procedures for other types of forestry carbon sink projects are largely similar. For example, CDM carbon sink projects must be approved by the National Development and Reform Commission before being submitted to the United Nations for registration, whereas approval from state authorities is not required for VCS carbon sink projects. The differences in the organizations undertaking each step mainly lie in project verification and certification agencies, project registration and issuing authority. Below is the work summary of the seven project development steps according to relevant policies and rules by the competent national authorities, the forestry carbon sink development procedures and the practical experience in project development.

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If the competent state authorities update the relevant policies and rules in force, the updated relevant policies and rules shall apply.

3.2.1

Project Design

The proposed project is preliminarily evaluated by the technical department (consulting body) in accordance with the relevant national rules and methodologies. If the basic conditions are not met, the project is abandoned. If the basic conditions are met and projects are economically feasible, we identify the baseline of carbon sink projects, design and investigate afforestation and prepare afforestation designs (afforestation projects), or forest management schemes or forest management operation designs (forest management projects), and report these to the local forestry departments for approval. According to the Interim Measures for the Administration of Voluntary Greenhouse Gas Emission Reduction Trading (FGQH [2012] No. 1668), the Guidelines for the Validation and Certification of Voluntary Greenhouse Gas Emission Reduction Projects (FGQH [2012] No. 2862) and the selected methodology of forestry carbon sink project, the project owner or consulting body conducts survey and development, identifies the baseline of projects, demonstrates additionality, estimates emission reductions, formulates the emission reduction calculation table and project design document (PDD) and prepares complete evidentiary and supporting documents necessary for the project Validation and registration. Usually, project materials to be prepared include: project operation design (afforestation project) or forest management scheme (forest management projects), project design or written scheme approval, environmental protection certificate, project development agreement, certificates of forest right and ownership, project design documents, emission reduction calculation table, sample monitoring land calculation table, certificate of construction commencement, relevant drawings (paper and electronic), etc.

3.2.2

Project Validation

The project owner or consulting body shall commission the agency authorized by the competent state department to conduct independent verification based on prescribed procedures and requirements in accordance with the Interim Measures for the Administration of Voluntary Greenhouse Gas Emission Reduction Trading, the Guidelines for the Validation and Certification of Voluntary Greenhouse Gas Emission Reduction Projects and the selected methodology for forestry carbon sink projects. The requirements for project validation are detailed in the Guidelines for the Validation and Certification of Voluntary Greenhouse Gas Emission Reduction Projects. The project owner or technical consulting body shall track the project validation process, give timely feedback on and provide relevant credentials for the problems and clarifications raised by the validation and verification body (VVB), and modify

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and improve project design documents. For approved project, the VVB shall issue a positive validation report. So far, the qualified VVBs for CCER forestry carbon sink projects are: China Environmental United Certification Center (CEC), China Quality Certification Center (CQC), Guangzhou CEPREI Certification Body Services Co., Ltd. (CEPREI), SinoCarbon Innovation & Investment Co., Ltd. (SinoCarbon), Research Institute of Forestry Policy and Information (RIFPI), Chinese Academy of Agricultural Sciences (CAAS), etc.

3.2.3

Project Registration

Project registration or filing is commonly referred to as project registration. After a project is validated by VVB, an application for the project is registered with the competent state department (Ministry of Ecology and Environment) for the record. The project owner enterprise (except central state-owned enterprises managed by State-owned Assets Supervision and Administration Commission of the State Council) must be initially approved by the provincial competent department before being submitted to the competent state department. At the same time, it requires a certificate of project authenticity issued by the provincial forestry department, so as to prove the land qualification as well as the authenticity of project activities. The competent state department commissions experts to conduct assessments, and, based on expert assessment opinions, review the application for the filing of voluntary emission reduction projects. Projects that meet the conditions will be approved and registered or recorded. The requirements for this procedure may be optimized and adjusted by the competent state department in the future. The materials required for the application are available on the website of the competent state department.

3.2.4

Project Implementation

Afforestation projects can be carried out in accordance with the PDD, forestry carbon sink project methodologies, as well as operation design and schemes of afforestation or forest management projects. Project implementation is the key to the success of a project and the obtaining of the expected carbon sink-based emission reduction. Therefore, project implementation is vital and should be paid high attention to. The approved operation design must be implemented to obtain the expected forestry results and carbon sink benefits of a project.

3.2.5

Project Monitoring

Project monitoring must be conducted according to the registered PDD and their monitoring plan and monitoring manual. We should calculate the project carbon sinks

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and emission reductions actually resulting from afforestation or forest management projects during the monitoring period, formulate project monitoring reports, and prepare supporting documents necessary for certification for the purpose of applying for voluntary emission reduction certification and filing. Monitoring reports must be prepared according to the latest template published by the competent state department. The project owner or consulting body shall collect and prepare documents relating to project monitoring for inquiry by the certification authority.

3.2.6

Project Certification

The owner or consulting body commissions the VVB registered with the competent state department to conduct independent certification. The certification procedures are similar to the validation procedures. The requirements for project certification are detailed in the Guidelines for the Vaildation and Certification of Voluntary Greenhouse Gas Emission Reduction Projects. The project owner or technical consulting body shall accompany and track project certification, give timely feedback on the problems raised by the VVB regarding the project, modify and improve the project monitoring report. For qualified projects, the certification body shall issue an emission reduction certification report. The VVB will send the monitoring report, emission reduction calculation table and the certification report to the competent state department via email.

3.2.7

CCER Issuance

CCER Issuance is often referred to as Chinese certified emission reduction issuance. The project owner shall submit the materials of application for the issuance of emission reductions directly to the competent state department. The competent state department shall commission experts to conduct evaluations, and, based on the expert opinions, conduct a joint review of the application materials. For projects that meet the criteria, it shall put emission reduction on the record and make issuance, issue a notice on emission reduction filing, and distribute the issued emission reductions to the project owner’s account in the national registry for trading in voluntary emission reductions.

3.3 Trading Process for CCER Forestry Carbon Sink Projects According to the Interim Measures for the Administration of Voluntary Greenhouse Gas Emission Reduction Trading, the emission reductions of voluntary emission reduction projects, including forestry as carbon sink, are registered in the national registry and traded at registered trading institutions after being filed and issued.

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The emission reductions of voluntary emission reduction projects shall be traded within trading institutions that have been registered with the competent state department in accordance with the trading rules formulated by trading institutions. The trading system of registered trading institutions is connected to the national registry to show the changes in emission reductions in real time. Below is an introduction to the procedures for account opening and trading involved in the CCER forestry carbon sink trading.

3.3.1

Procedures for Account Opening with the National Voluntary Emission Reduction Transaction Registration System

The national voluntary emission reduction transaction registration system (hereinafter referred to as the “registry”) is an information management system that records the issuance, transfer, cancellation, nullification, etc. regarding China Certified Emission Reductions (CCER). According to the Announcement on Matters Concerning the Operation of the National Voluntary Emission Reduction Transaction Registration System and Account Opening (hereinafter referred to as the Announcement) issued by the competent state department in 2015, participants in voluntary emission reduction trading are required to open an account with the registry by following the following steps. Step 1: Applicant submits materials. Participants in voluntary emission reduction trading refer to enterprises, institutions, groups and individuals. Participants are required to submit relevant materials to the designated agency8 to apply for account opening with the registry. The list of application materials is available on the website of the competent department. Step 2: Designated agency reviews materials. The designated agency will review the integrity and authenticity of the application materials. If it is approved, the designated agency will enter the information in the registry and file an application for account opening. The designated agency must submit or mail the original of the account opening application form to the registry administration body and send all application materials to the designated email address of the registry. Step 3: The registry administration body completes account opening. The registry administration body reviews the information on account opening and materials provided by the designated agency. If the information is correct and the materials are complete, it is approved and the account opening is confirmed in the system. If the information is incorrect or the materials are missing, the applicant must provide the required materials and resubmit the application for account opening. 8

Voluntary emission reduction trading institutions registered with the National Development and Reform Commission, including Beijing Environment Exchange (now Beijing Green Exchange), Tianjin Climate Exchange, Shanghai Environment and Energy Exchange, Guangzhou China Emissions Exchange, Shenzhen China Emissions Exchange, China Hubei Emission Exchange, Chongqing United Assets and Equity Exchange, Sichuan United Environment Exchange, Haixia Equity Exchange.

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Fig. 12.2 Flow chart of trading in CCER carbon sink

Step 4: System feedback. The system notifies the account representative, contact person and designated agency about the account opening by email.

3.3.2

Trading Procedures for CCER

After the CCER of forestry carbon sink is issued by the competent state department, it is traded on the carbon exchange that is registered with the national climate change authorities. It is used by key emitters (emission control organizations) to fulfill obligations on emission reduction or by relevant organizations and institutions to carry out voluntary emission reduction activities such as carbon neutrality and carbon compensation, fulfill social responsibility, and created a green image. The procedures for CCER trading for forestry as carbon sink9 are illustrated (see Fig. 12.2) by using the case of CCER transactions on Shanghai Environment and Energy Exchange, which is one of the voluntary emission reduction trading institutions filed with the competent state department. The procedures for CCER trading on the remaining exchanges are roughly the same. Step 1: The seller logs into the national voluntary emission reduction and emission trading registration system and transfers the eligible CCER that needs to be traded 9

“CCER Trading Procedures”, website of Shanghai Environment and Energy Exchange, July 16, 2018.

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from their trading account to the delivery account of Shanghai Environment and Energy Exchange. Step 2: The trading parties log into the carbon emission trading system of the Shanghai Environment and Energy Exchange to trade CCERs. Step 3: If the buyer is a pilot carbon trading enterprise in Shanghai and needs to perform the offset obligation, it can send an instruction for the transfer-out of CCERs on the Shanghai Carbon Emission Trading System, so as to transfer the CCERs from the delivery account of Shanghai Environment and Energy Exchange to the trading account in the national voluntary emission reduction trading registration system until the offset is completed. CCERs purchased is transferred to the national voluntary emission reduction trading registration system on the next trading day. 3.3.3

Cancellation of CCERs

Emission reductions used for offsetting carbon emissions should be canceled on the national registry after the transaction is completed.

4 Progress of National Forestry Carbon Sink Trading and Project Cases 4.1 Progress of CDM Carbon Sink Trading and Project Cases 4.1.1

Development and Transaction Progress

There are four methodologies for CDM forestry carbon sink projects: two methodologies for terrestrial afforestation projects (large and small projects) and two methodologies for wetland mangrove afforestation projects (large and small projects). Forestry carbon sink projects belong to the professional field of afforestation and reforestation. By the end of June 2021, there were 66 CDM forestry carbon sinks registered nationwide, accounting for 0.8% of the 7854 registered CDM projects. China has five CDM afforestation carbon sink projects: two in Guangxi, two in Sichuan and one in Inner Mongolia, with a total area of about 300,000 hectares. At present, there are almost no development prospects for China’s CDM carbon sink projects. In order to reduce the risk of carbon sink trading, it is not recommended to develop CDM carbon sink projects when there is no buyer.

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CDM Project Cases

(1) CDM case: Reforestation project in the Pearl River Basin in Guangxi, China. The “Reforestation project in the Pearl River Basin in Guangxi, China” is the world’s first CDM forestry carbon sink project that has been developed and traded. Beginning in 2006, the project began to cultivate 4000 hectares (design area) of manmade forests in Cangwu County and Huanjiang County, Guangxi. The World Bank BioCarbon Fund paid US$2 million to purchase 480,000 tons of carbon sink emission reductions in this project. The unit price of the transaction was US$4.35 per ton. The key to the success of this project is that in addition to absorbing and fixing carbon dioxide, the project brings multiple benefits such as increasing farmers’ incomes, conserving water sources, and protecting ecology and biodiversity. The carbon sink CERs during the first and second monitoring periods of the project have been issued by the United Nations. (2) CDM case: Forestry carbon sink project in Horinger Shengle International Ecological Demonstration Zone in Inner Mongolia. “Forestry carbon sink project in Horinger Shengle International Ecological Demonstration Zone in Inner Mongolia” is a CDM afforestation carbon sink project organized and traded in China. Funded by the Lao Niu Foundation, China Green Carbon Foundation and its partners have built nearly 2667 hectares of manmade forests in Horinger County, a semi-arid region in Hohhot City, Inner Mongolia, under this project since 2012. American Walt Disney paid US$1.8 million to purchase 160,000 tons of forestry carbon sink CERs. The unit price of the transaction was US$11.25 per ton. The characteristics of the project are as follows: it is registered as the UN CDM project and as a gold-level project under the Climate, Community & Biodiversity Standards (CCB); has multiple benefits such as tackling climate change, protecting biodiversity, and promoting social development, and has won the Excellent Project Award under China Charity Award.

4.2 Progress of VCS Carbon Sink Trading and Project Cases 4.2.1

Development and Transaction Progress

The international Verified Carbon Standard (VCS) is the world’s highest-level voluntary carbon reduction market standard. The issuance and trading volume of VCS carbon sinks are dominant, which are mainly used by enterprises to voluntarily reduce carbon emissions, fulfill social responsibility, and create a green image. Well-known socially responsible enterprises, such as Shell, HSBC, Microsoft, Land Rover and Leopard, contribute to the fight against climate change by purchasing VCS forestry carbon sinks for carbon neutrality and carbon offset. According to the VCS Project Database, by June 2021, a total of 205 forestry projects worldwide had been registered under the VCS [accounting for 12% of the total registered projects (1709)]. There are 29 registered forestry projects in China,

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and 16 have obtained permits for emission reductions. Of the registered forestry projects, there are eight forest management projects, distributed in Inner Mongolia, Yunnan, Jiangxi, Fujian and Hubei; there are 21 afforestation projects, distributed in Qinghai, Guizhou, Henan, Sichuan, Anhui, Jilin, Hunan, Guangdong and other provinces.

4.2.2

VCS Forest Project Cases

Inner Mongolia’s Chao’er forest management carbon sink project, the first developed and traded project in China’s largest state-owned forest zone, was selected for the VCS case study. Chao’er Forestry Bureau in Inner Mongolia (project owner) organized the implementation of an international VCS forest management carbon sink project. By banning commercial logging in the project area, it turns timber forests into protected forests, thereby reducing logging-induced carbon emissions and increasing carbon sinks. The main tree species are larch and white birch in the project, which covers an area of 11,010 hectares. According to the VCS VM0010 Methodology for Improved Forest Management, the project was developed by experts organized by China Green Carbon Foundation. In 2016, it was registered under the VCS and obtained the issuance permit for the first monitoring period (verification period), with a project registration number of VCS ID 1529. The project’s crediting period is 20 years (January 1, 2010 to January 1, 2029). Carbon sink emission reductions are expected to reach 1.386 million tons of carbon dioxide equivalent during the crediting period. The Verified Carbon Units (VCUs) in the first period is 380,000 tons of carbon dioxide equivalent. In the second monitoring period of the Inner Mongolian Chuo’er Forest Management Carbon Sink Project, in which the Beijing Institute of Green Resources (BIGR) provides technical development and management services, the VCUs issued are 340,000 tons of carbon dioxide equivalent. The project is significant in the following aspects. The project has brought tremendous environmental and ecological benefits after it was implemented. After forest harvesting is reduced, there is a significantly less human disturbance in the project area. The natural regeneration of the forest has obvious effects, young trees and seedlings are protected, the shrubs and herbaceous plants have recovered rapidly, what were logways are now covered by young trees, and the forest cover has increased. Local soil erosion caused by rainstorms is a thing of the past. The population and variety of wild animals have obviously increased, with the ecological chain being improved. Compared with other regions with similar geographical, soil and climatic conditions, this region has more abundant species, with significantly reduced probability and hazard of forest diseases and insects. Following the reduction of wood felling in the project area, the Chao’er Forestry Bureau holds training in various types to enhance forestry workers’ forest management skills and knowledge. Logging workers previously worked and had incomes only in winter, but they are now engaged in forest management and protection,

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bringing them steady income throughout the year. Thanks to forest management and protection, the yield of wild berries, wild medicinal herbs, wild economic plants and wild fungi have increased remarkably, bringing more income to local residents. The gathering industry and the non-timber forest-based economy are also taking shape, creating jobs and boosting residents’ incomes. The project’s carbon sink trading is as follows. After the project was registered and issued, the signing ceremony was held at East China Forestry Exchange, a national pilot platform for forestry carbon sink trading in Hangzhou, Zhejiang Province, with Zhejiang Huayan Investment Management Co., Ltd. on December 18, 2017, with a sales volume of 400,000 yuan. On January 18, 2018, the second sales agreement was signed with Zhejiang Huayan Investment Management Co., Ltd. at Great Khingan Key State-owned Forestry Administration Bureau in Inner Mongolia, with a sales volume of 800,000 yuan. On April 8, 2021, the first signing ceremony for the listed transaction was held with China Carbon Sinks Holdings Co., Ltd. on Inner Mongolia Property Rights Trading Market, with a sales volume of about three million yuan. The income of the three transactions exceeded four million yuan. The Chao’er carbon sink transaction seems to be a small step taken by the Great Khingan Stateowned forest Area in Inner Mongolia in terms of forestry carbon sink management, but is actually a big step forward in terms of promoting the trade in ecological products, and marketization and monetization of ecological products, marking that ecological products in the forest area hit the market. Moreover, this project has completed the second verification period’s credits of 340,000 tons of carbon sinks for the issuance and approval procedures. It has attracted many foreign and domestic buyers for negotiations and purchases. The owners are going through the approval procedures for sales.

4.3 Progress of Trade in CCER Carbon Sinks and Project Cases 4.3.1

Development and Transaction Progress

CCERs have been included in China’s voluntary emission reduction trading system, and incorporated into China’s pilot regional carbon trading market and Sichuan United Environment Exchange as an offset mechanism. It will be included in the national carbon market’s offset mechanism first for the implementation of emission reductions by key emitters. For CCER forestry carbon sink projects, there are four methodologies approved by the national climate change authorities for the record: “AR-CM-001-V01 Methology for carbon sink afforestation projects”, “AR-CM-002-V01 Methology for bamboo

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afforestation carbon sink projects”, “AR-CM-003-V01 Methology for forest management carbon sink projects”, and “AR-CM-005-V01 Methology for bamboo forest management carbon sink projects”. By the end of March 2017, 15 had been registered as forestry carbon sink projects, and 96 forestry carbon sink projects listed for public comments before Validation and Registration. The project types include afforestation, bamboo afforestation, and forest management. Three forestry carbon sink projects have obtained carbon sink emission reductions issued in the first period. The first-phase carbon sink emission reductions of “Guangdong Chimelong Carbon Sink Project”, China’s first CCER forestry carbon sink project, were successfully traded in 2015, with a unit price of 20 yuan per ton. It was used by Guangdong Yudean Group, an emission control enterprise in the pilot carbon trading program in Guangdong, to fulfill its obligations for emissions control. This project is important because it realized the first CCER forestry carbon sink transaction in China, and provided a model for China to develop CCER forestry carbon sink projects and conclude trading in carbon sinks. By the end of 2020, CCER and Beijing BCER (forestry carbon sink project registered and issued in Beijing and can be used by pilot enterprises in Beijing for emission reduction fulfillment) had inked over 30 transactions of forestry carbon sinks, with a volume of more than 700,000 tons, and the average transaction price is about 15 yuan per ton. The unit price is higher than that of other CCER products. Fujian Carbon Sink FFCER10 is a forestry carbon sink project registered and issued in Fujian Province and can be used by pilot enterprises in Fujian for emission reduction fulfillment. By the end of 2020, 12 projects had been filed for the record, and more than two million tons of carbon sinks had been issued, with a cumulative volume of 2.567 million tons and a transaction value of 38.6187 million yuan. It is at the forefront in China in terms of transaction scale and value. On the whole, the domestic CCER carbon sink price is 10–30 yuan per ton, which is higher than that in other professional fields.

4.3.2

CCER Forest Project Cases

(1) CCER case: Guangdong Changlong carbon sink afforestation project. The Guangdong Changlong carbon sink afforestation project is China’s first CCER forestry carbon sink project that has been successfully developed, registed, issued and traded.11 With the support of Guangdong Provincial Forestry Department, China Green Carbon Foundation and Guangdong Forestry Survey and Planning Institute provided technical services for this project, and China’s first CCER forestry carbon sink project that can be traded on the carbon market was developed according to AR-CM-001-V01 Methodology for Carbon Sink Afforestation Projects, a methodology registered with the National Development and Reform Commission. The project owner, Guangdong Cuifeng Landscaping 10 11

FFCER refers to Fujian Forestry Certified Emission Reductions. Jinliang Li (2016).

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Co., Ltd., with the support of the China Green Carbon Foundation and Guangdong Carbon Sink Fund, implemented carbon sink afforestation with an area of 867 hectares in the barren mountain area suitable as forest in the less developed areas of Guangdong Province (Wuhua County, Xingning City, Zijin County and Dongyuan County) in 2011. The mingled forest was planted randomly with nine species of trees: camphor trees, Chinese cherry, Chinese sweet gum, elaeocarpus sylvestris, acacia rachii, michelia macclurei, castanopsis hystrix, erythrophloeum ferdii, and Castanopsis fissa. In the 20-year crediting period (January 1, 2011 to December 31, 2030), the project is expected to reduced greenhouse gas emissions by 347,000 tons of carbon dioxide equivalent, with an average annual reduction of 17,000 tons of carbon dioxide equivalent. This is the first CCER forestry carbon sink project in China to be approved and issued by the national climate change authorities, and also the first one to complete trading in carbon sinks. It truly realized the monetization of ecological benefits of forests and explored a new way to turn lucid waters and lush mountains into invaluable assets. The project is important for promoting sustainable development. Specifically, first, the absorption and fixation of carbon dioxide through afforestation can lead to measurable, reportable and verifiable greenhouse gas emission mitigation, playing the experimental and demonstration role of carbon sink afforestation projects. Second, increase the carbon sink function of forest ecosystems in the project area, accelerate the process of forest restoration, control soil erosion, protect biodiversity, and slow down global warming. Third, boost the income of local farmers and promote the sustainable development of the local economy and society. The project has significant practical significance: the project is the first CCER forestry carbon sink project successfully developed in China, and has realized the first transaction of CCER forestry carbon sinks in China. It serves as a real case study for implementing CCER forestry carbon sink projects and trading in CCER carbon sinks in China, and helps cultivate professional personnel, which is important for promoting trading in forestry carbon sinks in China. The development and transaction of this project are as follows. In September 2010, Guangdong Cuifeng Landscaping Co., Ltd. entrusted Guangdong Forestry Survey and Planning Institute to design the “Guangdong Chimelong Carbon Sink Afforestation Project”. In October 2010, Guangdong Forestry Survey and Planning Institute completed the Operation Design of Guangdong Chimelong Carbon Sink Afforestation Project. In November 2010, the Guangdong Provincial Forestry Department issued the Reply on the Operation Design of Guangdong Chimelong Carbon Sink Afforestation Project. In January 2011, the Contract for Construction of Guangdong Chimelong Carbon Sink Afforestation Project was signed, and afforestation commenced. In November 2013, the project design document (Ver. 1) was completed in accordance with the requirements of the “AR-CM-001-V01 Carbon Sink Afforestation Project Methodology” registered with the National Development and Reform Commission. On July 2, 2014, the project design document (Ver. 3) was

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completed after the independent validation by China Environmental United Certification Center (CEC), a voluntary emission reduction trading project Validation and verification body that was registered with the National Development and Reform Commission. On July 21, 2014, the project was validated and registered with the National Development and Reform Commission. From March to May 2015, the emission reduction monitoring and certification for the first monitoring period (January 1, 2011 to December 31, 2014) was carried out, the project certification report was completed, and the project monitoring report (Ver. 3) was revised. On May 25, 2015, the project’s emission reductions for the first monitoring period were registered with the National Development and Reform Commission, and the first-phase CCER was issued. It was all purchased by Yudean Group Co., Ltd. for fulfilling obligations on emission reductions. (2) FFCER case: Carbon sink project for forest management in state-owned forest farm in Jianyang District. The carbon sink project for forest management in the state-owned forest farm in Jianyang District is one of the first Fujian Forestry Carbon Emission Reductions (FFCER) projects developed and traded in Fujian Province. According to the project design documents, monitoring reports, validation reports and certification reports, this project is a forestry carbon sink project in the forest management category in Fujian, and is invested, built and operated by Fujian Jianyang Forestry Corporation. The project is located in Jianyang District, Nanping City, Fujian Province, with small plots distributed in 13 state-owned forest cultivation farms (forest farms) such as Dachan Forest Cultivation Farm, Kunzhong Forest Cultivation Farm, Xidong Forest Cultivation Farm and Lyusheng Forest Farm, with a forest operation scale of 9468.9 hectares. The project period is 20 years. The project improves the nutrition space of forest stands through comprehensive measures such as intermediate felling and fertilization, accelerates the growth of man-made forests, and obtains greater carbon sink benefits than the baseline scenario. The carbon sink emissions reductions during the 20-year crediting period under this project are expected to reach 445000 tons of carbon dioxide equivalent. The project has been registered with the competent authorities of Fujian Province and obtained the emission reductions in the first verification period. The carbon sink emissions reductions issued during the first verification period (January 1, 2007 to April 30, 2017) were 400000 tons of carbon dioxide equivalent, and carbon sink trading was completed. The implementation of the project is important for aiding the local forestry-based response to climate change. It is manifested in the following areas: First, the absorption and fixation of carbon dioxide through forest management activities can lead to measurable, reportable and verifiable greenhouse gas emission reductions. It plays the experimental and demonstration role of the forest carbon sink project, drives and leads the development of carbon sink projects in local and surrounding areas, and promotes forest ecosystem restoration and long-term operations. Second, enhance the carbon sink function of forest ecosystems in the project area, effectively curb soil erosion, regulate the climate, protect biological diversity, enhance the service

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function of ecosystems, and promote a sustainable local eco-environment. Third, manage forests to improve the biomass of local forest stands, and improve the carrying capacity of the local environment; use the superior forest resources to reduce forestry production risks for forest workers in the project area, and provide basic support for engaging in eco-tourism, non-timber forest-based management, etc.; leverage the positive role of ecological industry in the economic development of mountainous areas, boost farmers’ income while raising their environmental awareness, and promote the sustainable development of local economy and society. The development and transaction of the project are as follows. In May 2006, the Fujian Jianyang Forestry Corporation Plan of Forest Management was formulated in accordance with the Technical Regulations on the Preparation of Forest Management Schemes in Fujian Province. On July 10, 2006, the Forestry Bureau of Jianyang City approved the implementation of the Fujian Jianyang Forestry Corporation Plan of Forest Management. On May 16, 2017, the project design document (ver.1) was developed and completed in accordance with Fujian regulations on forestry carbon sequestration projects and the requirements of forest management carbon sink methodology. On June 13, 2017, the project design document was published on the special website of the Fujian Provincial Forestry Department. From April to May 2017, project validation was conducted, and the project validation report as well as project design document (ver. 4) were completed. During the same period, the project monitoring of the first monitoring period was conducted, and the project monitoring report (ver. 1) was completed. On June 13, 2017, the project monitoring report was announced. From May to September 2017, the emission reductions of the first monitoring period were certified, the project certification report was completed, and the project monitoring report (ver. 4) was revised. In December 2017, the project was filed with the competent authority, and the emission reductions for the first verification period were issued. From 2017 to 2018, trading in carbon sink emission reduction was conducted on the carbon trading platform of Fujian Haixia Stock Equity Exchange Center for the fulfillment of emission reduction obligations by emission control enterprises in the Fujian pilot carbon trading program.

4.4 Progress of Other Carbon Sink Trading and Project Cases 4.4.1

Progress of China Green Carbon Foundation’s CGCF Carbon Sink Project Transaction as Well as Project Cases

The national pilot program of forestry carbon sink trading was carried out in 2011,12 10 enterprises including Alibaba purchased 148,000 tons of carbon sinks in six 12

“National Forestry Carbon Sink Trading Pilot Program Officially Launched, the First 148000 Tons of Forestry Carbon Sink Indicators Completed”, China Business News, November 2, 2011.

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CGCF afforestation projects through the “National Pilot Platform for Forestry Carbon Sink Trading” (East China Forestry Exchange) for voluntary emission reduction and fulfillment of social responsibility by enterprises or organizations and for responding to climate change. The unit price of the transaction is 18 yuan per ton. China’s first transaction of carbon sink in forest management project was conducted in 2013.13 Henan Yongsheng Wanjia Soybean Product Company signed a contract to buy 6000 tons of carbon sink emission reductions for the pilot Yichun forest management carbon sink project, with a unit price of the transaction of 30 yuan per ton. In 2014, the pilot program of forest management carbon sink trading by farmers in Lin’an was conducted,14 and 42 farmers became the first beneficiaries of forest management carbon sinks. China Construction Bank Zhejiang Branch purchased carbon sinks for carbon neutral work and obtained a carbon neutrality certificate issued by China Green Carbon Foundation.

4.4.2

Progress of Guangdong Puhui Certified Emission Reductions (PHCER) Project as Well as Project Cases

In 2017, Guangdong Province began to explore the use of market mechanisms (Puhui Certified Emission Reductions, or PHCER) to allocate carbon emission permit resources and pilot trading in carbon emissions. Forestry PHCER plays a key role in the pilot program of the Guangdong carbon emission trading system and in the implementation of targeted poverty alleviation policies. The emission reductions developed on the basis of the registered Guangdong forestry PHCER methodology are allowed on the Guangdong Province carbon emission trading market to offset the carbon emissions by emission control enterprises. Guangdong forestry PHCER methodology stipulates the accounting process and method for PHCER generated by forestry-based carbon sink enhancement on the basis of the second-class survey data of forest resources by the competent forestry department during the process of forest management and operations. The accounting method is simple, and the carbon sink accounting does not require a field sample-plot survey and monitoring, which is cost-effective and has a good poverty alleviation and compensation effect. Forestry-based carbon sink enhancement is a measure to increase forest-based carbon sinks through better tending of trees, logging reduction, disaster protection, and sustainable management. The scope of application of this methodology is: The areas where the PHCER is piloted include ecological development areas determined according to the Guangdong plan for development priority zones; designated poor villages in the province; old revolutionary areas, former central Soviet areas and regions inhabited by ethnic groups in the province.

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Li Zhu (2013). “Lin’an Released First Farmer Forest Management and Carbon Sink Trading System Yesterday— Extra 30 Yuan Per Mu of Agriculture and Forestry Land”, www.zjol.com.cn, October 15, 2014.

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According to the statistics provided by the competent forestry department of Guangdong Province, by the end of the first half of 2020, a total of 21 PHCER projects had been developed, with emission reductions of 1,277,386 tons. 19 projects had been traded. 10 projects were transacted through on-the-spot trading or online auction trading, with emission reductions of 703,482 tons and a transaction value of 16.6299 million yuan, with an average price of 23.64 yuan per ton. Nine projects were transferred through agreement, with a carbon sink indicator of 495,422 tons, with a unit price of 11 to 17 yuan per ton.

5 The Role of Other Carbon Sinks on Carbon Peaking and Carbon Neutrality 5.1 Grassland Carbon Sinks and Their Main Ways of Increasing Sinks 5.1.1

Overview of Grassland Carbon Sinks

According to the Grassland Law of the People’s Republic of China, grassland refers to natural grassland and artificial grassland. Natural grasslands include meadows, grassy hills and grass slopes. Artificial grasslands include improved grasslands as well as grasslands that were previously marginal cropland, excluding urban grasslands. Grasslands are the color-fast green skin of the Earth, precious natural resources, and a key foundation for ecological security. Grasslands worldwide cover an area of 3.27 billion hectares, and China has 392.8 million hectares of natural grasslands, accounting for about 12% of the global total. China is a veritable big country in terms of grasslands. According to the findings of research by Academician Fang Jingyun of the Chinese Academy of Sciences, the biomass of grassland vegetation in China accounts for 10.3% of the total biomass of the country, and the carbon stored in grassland soil accounts for 36.5% of the total carbon stored in soils nationwide. According to the People’s Republic of China’s Second Biennial Update Report on Climate Change, the net amount of carbon dioxide (net carbon sinks) absorbed by China’s grasslands in 2014 was 109.16 million tons, accounting for 9.8% of the 1.115 billion tons of carbon dioxide equivalent for net carbon sinks of LULUCF in the same year. Grassland is a special type of vegetation. “Wild fires burn them but cause no death, spring breeze brings them to life next year”. This is a vivid portrayal of grasslands. The part of the grassland above the ground grows in spring and dies in autumn. Grass is usually used as cattle and sheep feed, and grass withers and rots to emit carbon dioxide into the atmosphere in autumn. In view of this, the IPCC stipulates that the part of the grassland above the ground emits zero carbon dioxide, and is neither a carbon sink nor a carbon source, or increases in carbon sink. Grassland carbon sinks primarily originate from the underground part. As a result of the sustainable

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management of grasslands, the humus layer can be increased to improve the soil as well as a soil carbon sink. According to IPCC guidelines, soil carbon sink per hectare of grassland adds about 1.83 tons of carbon dioxide per year (or 0.5 tons of carbon). If the state and local governments strengthen the restoration and conservation of the grassland ecosystem and 50% of grasslands in the country are managed in a scientific and sustainable manner, grassland soil carbon sinks can additionally absorb about 359 million tons of carbon dioxide every year, which is a handsome figure. Chinese experts developed a methodology for measuring and monitoring greenhouse gas emissions reduced by sustainably managed grasslands. It has been approved by the international VCS organization as a VCS methodology (VM0026), as well as the national climate change authorities as a CCER carbon sink project methodology (AR-CM-004-V01). However, due to the low level of carbon sinks per unit area and the high cost of development, no CCER grassland carbon sink project has been developed, and no approval has been secured from the competent department or registry. In the future, we can simplify the methodology, or develop a standard methodology to reduce development costs and facilitate the development and trading of grassland carbon sink projects, thereby promoting the conservation and restoration of grasslands in China.

5.1.2

The Principal Way to Increase Grassland-Based Carbon Sinks in China

In recent years, China’s grassland resources have been significantly destroyed, causing serious grassland degradation. In particular, serious overgrazing leads to grassland deterioration and desertification. In China, low-yield grassland with a per unit yield of less than 3.5 tons per hectare accounts for 64.8%. Degraded grasslands become carbon sources. In view of this, we must step up the conservation and restoration of grasslands. To improve the structure and functions of grassland ecosystems and boost grassland-based biological yield and carbon sinks, it is necessary to follow the basic policy that prioritizes protection and conservation and features natural restoration. We should keep the grassland ecosystem healthy and stable, and continuously improve the grassland eco-environment. Given the current situation of degraded grasslands, dwindling area, and ecological fragility, we should step up protection to ensure that the grassland area is not reduced, with the same use purpose, and improving quality and functions. Proactive and effective steps are taken to enhance the capacity of China’s grasslands as carbon sinks.15 Specifically: (1) Vigorously launch grassland protection and restoration, strengthen grassland cultivation, and guide the rational and scientific utilization of grasslands. (2) Strengthen grassland supervision and management, investigate and crack down on the expropriation of grasslands, as well as the destruction of grassland vegetation against laws and regulations. 15

Jiawen Liu (2018).

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(3) Give equal importance to afforestation and grass planting, and carry out the land greening initiative integrating forests and grasslands. (4) Improve the institutions for promoting ecological progress, further improve policies on grassland protection, increase ecological compensation, and establish a long-term mechanism conducive to the sustainable development of grasslands.

5.2 Wetland Carbon Sinks and Their Main Ways to Increase Carbon Sinks 5.2.1

Overview of Wetland Carbon Sinks

Wetlands usually refer to natural or artificial, permanent or temporary marshland, wet grasslands, peatlands or water areas, which have static or flowing water, fresh, brackish or saltwater bodies, including water bodies with a depth of no more than six meters at low tides. Known as the “kidney of the Earth”, wetlands serve the functions of supplying water, regulating a livable environment, and bringing diversity to cultural activities. They are also known as the cradle of life. Wetlands play a key role in conserving water sources, purifying water, storing flood water for drought, regulating the climate and preserving biodiversity. Wetlands are important natural ecosystems as well as a key component of naturally ecological space. As a key part of ecological conservation, wetland protection is essential for ecological security, sustainable economic and social development, and the survival and well-being of future generations. Usually, wetlands contain undecomposed organic matter, and are a carbon pool. In addition, wetlands serve as a carbon sink as wetland vegetation grows, absorbs and fixes carbon dioxide, and produces organic matter. At the same time, wetlands also release methane gas. However, even with carbon emissions, wetlands are usually a carbon sink. Nevertheless, if wetlands, especially peatlands, are severely degraded, such as draining wetland water, greenhouse gases from wetlands will be emitted into the atmosphere, exacerbating climate warming. According to the research findings, China’s wetlands cover an area of 110,000 square kilometers, vegetation carbon density per hectare is 22.2 tons of carbon, the vegetation carbon storage is 240 million tons of carbon, the soil carbon storage is 4.57 billion tons of carbon, and the total carbon storage reaches 4.81 billion tons of carbon (approximately 17.64 billion tons of carbon dioxide).16 According to the People’s Republic of China’s Second Biennial Update Report on Climate Change, in 2014, China’s wetlands absorbed 44.54 million tons of carbon dioxide net (net carbon sinks) and emitted 1.72 million tons of methane (the global warming potential of methane is 21; it is converted into 36.12 million tons of carbon dioxide equivalent). After offsetting carbon sink sources, wetlands’ net carbon sinks reached 8.42 million tons of carbon dioxide equivalent, representing 0.8% of the 16

Guirui Yu et al. (2013).

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1.115 billion tons of carbon dioxide equivalent for net carbon sinks of LULUCF in the same year. If the hydrothermal conditions of marsh wetlands are very stable, peat in wetlands is not involved in the atmospheric carbon dioxide cycle. Therefore, the accumulation of organic matter in swamps helps mitigate the greenhouse effect caused by anthropogenic carbon emissions. If swamps are drained and turned into farmland, the swamp loses its carbon accumulation capacity and accelerates the decomposition of organic matter in swamps. As a result, swamps change from a carbon “sink” to a carbon “source”.17

5.2.2

The Main Way to Increase Wetland Carbon Sinks in China

According to the State Council’s Plan on Rules for Wetland Protection and Restoration,18 the main ways to increase wetland carbon sinks are as follows: (1) Check the trend of decline and achieve the target of the wetland protection area. China’s wetlands feature diverse types, wide distribution and rich biodiversity. In the process of building the wetland protection program, China has formed a wetland protection system featuring wetland nature reserves. However, the protection of wetlands is still prominent for a variety of reasons. (2) Comprehensively protect wetlands, and advance protection and restoration. The “comprehensive protection of wetlands” is primarily manifested in three areas: include wetlands nationwide in the scope of protection, combine wetlands with other ecosystems, and manage different wetlands at different levels. (3) Form a synergy for protection and ensure the implementation of rules. The focus is on the implementation of rules for wetland protection in five areas: to improve the system for wetland management at different levels, to ensure that the existing wetland area is not reduced, to shore up weaknesses in the supervision of wetland utilization, to improve the overall functions of the wetland ecosystem, and to focus on the remediation effect of wetland protection. Since these measures proposed in the plan cover many areas and are policy-mandated, it requires the collaboration of various departments to form a synergy for wetland protection and remediation.

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“Wetlands Are Global Carbon Sinks: Artificial Destruction Will Cause Wetlands to Become Carbon Sources”, www.weather.com.cn, April 19, 2010. 18 Circular of the General Office of the State Council on Issuing the Plan for Wetland Protection and Restoration Rules (GBF [2016] No. 89), November 30, 2016.

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5.3 Ocean Carbon Sinks and Their Main Ways to Increase Carbon Sinks 5.3.1

Overview of Ocean Carbon Sinks

Ocean carbon sinks are also known as blue carbon sinks. The ocean is a vast pool of carbon dioxide and performs carbon dioxide exchange with the atmosphere through surface seawater. The ocean absorbs about a quarter of anthropogenic carbon emissions. The marine inorganic carbon pool stores about 39.12 trillion tons of carbon, which is more than 50 times that of the atmosphere and nearly 20 times that of the biosphere. The inorganic carbon of surface seawater is about 1.02 trillion tons of carbon, and that of deep seawater is about 38.1 trillion tons of carbon. The marine biota has smaller carbon storage, with only about three billion tons of carbon. Ocean carbon sinks, playing a vital role in the Earth’s carbon cycle, are relatively stable and are a type of natural process. It is often difficult for humans to artificially increase blue carbon sinks on a large scale. China’s coastal waters include the Bohai Sea, the Yellow Sea, the East China Sea and the South China Sea, with an aggregate area of about 4.71 million square kilometers, representing 1.3% of the global ocean area. There is no scientific and systematic research on China’s ocean carbon storage and carbon sinks, nor authoritative research data.

5.3.2

The Main Ways to Increase Ocean Carbon Sinks in China

As ocean carbon sinks are relatively stable, it is often difficult for humans to artificially increase ocean carbon sinks on a large scale. In order to increase the ocean’s capacity to absorb carbon dioxide, it is necessary to conduct scientific analysis and evaluation, and prudent consideration can be given to the following ways to increase ocean carbon sinks under the premise of controllable ecological risks and economically feasible technologies. (1) Artificially plant mangroves as well as protect and restore mangrove ecosystems in offshore areas with degraded mangroves, so as to increase mangrove carbon sinks. (2) Artificially plant, protect and restore seagrass bed ecosystems in offshore areas with degraded seagrass beds, so as to increase ocean carbon sinks. However, this is short-term carbon sequestration. (3) Plant seaweed on a large scale in suitable offshore areas to absorb carbon dioxide, prevent and treat eutrophication and mitigate climate change. There are mainly about 100 species of kelp. Of these, the yield of sea-tangle, gracilaria, wakame, laver and eucheuma accounts for about 98% of the total yield of kelp. This also belongs to short-term carbon sequestration. (4) A trace amount of ferric salt can be released in seaweed-producing sea areas to promote the growth and yield of seaweed, increase the absorption of carbon

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dioxide by seaweed, thus increasing ocean carbon sinks. Experiments with the application of ferric salts in 1992 and 1995 confirmed that the use of trace amounts of ferric salt can accelerate algae proliferation in the ocean, thereby increasing blue carbon sinks. However, the potential risks and damage to marine ecosystems from the use of trace amounts of ferric salt in the oceans are unclear. Therefore, it is only an option that should be used with great caution. This also belongs to short-term carbon sequestration. Carbon sinks are important for China’s carbon peaking and carbon neutrality. The Central Economic Work Conference 2020 listed carbon peaking and carbon neutrality as one of the eight key tasks in 2021, stressing the need to launch largescale greening programs and boost the capacity of ecosystems as carbon sinks. The ninth meeting of the Central Committee for Financial and Economic Affairs held on March 15, 2021 stressed the need to boost the capacity of ecological carbon sinks, strengthen spatial planning of land as well as its utilization control, play the role of forests, grasslands, wetlands, oceans, soils and frozen soils in carbon sequestration, and enhance the carbon sink increment in ecosystems. The carbon peaking and carbon neutrality timetable, roadmap, and “1+N” policy system successively issued by the Steering Group for Work on carbon peaking and Carbon Neutrality will accelerate transformation and innovation in 10 areas including “continuously consolidating and improving carbon sink capacity”.19 The seventh area requires consolidating the capacity of ecosystems as carbon sinks and enhancing carbon sink increment of ecosystems. According to a Xinhua Finance report on April 19, 2021, the National Development and Reform Commission, the leading department in charge of carbon peaking and carbon neutrality work, lists “strengthening ecological protection and restoration, and improving the carbon sink capacity of ecosystems across the board” as one of the key tasks in eight areas,20 and comprehensively promotes the implementation of national strategic decisions on carbon peaking and carbon neutrality. It can be seen that increasing the carbon sinks of forest-based ecosystems is important for achieving the “dual carbon” goals, and this is a glorious mission. In particular, forestry carbon sinks have ecological, social and economic benefits as typical ecological products, and are well received by the international community. Moreover, the R&D of grasslands, wetlands and ocean carbon sinks is important for conserving biodiversity, mitigating and adapting to climate change, and achieving the “dual carbon” goals. To this end, this chapter introduces carbon sinks and their role and potential in carbon peaking and carbon neutrality as well as the main ways to increase carbon sinks, elaborates on key concepts, key content, and ways to increase carbon sinks, and shares successful cases of carbon sink projects. It is of guiding value for contributing to carbon peaking and carbon neutrality.

19

Zhenhua Xie (2021). “National Development and Reform Commission: Promoting Emission Peak and Carbon Neutrality in Eight Areas”, Xinhua Finance app, April 19, 2021.

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References BBC, “The Carbon Uptake of Afforestation in China ‘Underestimated’”, China Daily Bilingual News, November 26, 2020. Jia Ding, “Nature: Carbon Sink Capacity of China’s Terrestrial Ecosystems Grossly Underestimated”, China Science Daily, October 30, 2020. Jinliang Li, editor-in-chief, Cases of China’s Forestry Voluntary Greenhouse Gas Emission Reduction Projects, China Forestry Publishing House, 2016. Nuyun Li, China’s Forestry Carbon Sink, China Forestry Publishing House, 2016, p. 6. Jiawen Liu,“Valuing and Leveraging the Carbon Sink Function of Grasslands”, China Green Times, December 6, 2018. National Forestry Administration, Action Plan for Responding to Climate Change Through Forestry, China Forestry Publishing House, 2010, p. 21. Zhaozhe Wu and Qing Li, “China’s Terrestrial Ecosystems Fixes 1.11 Billion Tons of Carbon on Average Annually”, China Green Times, November 20, 2020. Zhenhua Xie, “1 + N Policy for Emission Peak and Carbon Neutrality to Be Released, Faster Transformation in Ten Areas”, Beijing News, July 24, 2021 Guirui Yu, Nianpeng He, Qiufeng Wang, et al., Theoretical Basis and Comprehensive Assessment of Carbon Revenue and Expenditure as well as Carbon Sink Function of China’s Ecosystems, Science Press, 2013, p. 132. Jun Zhu, “Integrated Conservation and Restoration of Mountains, Rivers, Forests, Farmlands, Lakes, and Grasslands, over 700 Nature Reserves Increased During the 13th Five-Year Plan Period”, People’s Daily, December 18, 2020. Li Zhu, “China’s First Methodology for Forest Management-Based Carbon Sink Increase and Emission Reduction Project Released,” Science and Technology Daily, June 4, 2013.

Chapter 13

Global Collaboration for Carbon Peaking and Carbon Neutrality Wang Mou, Xin Yuan, Chen Ying, and Zhang Yongxiang

Article 4 of the Paris Agreement states: “In order to achieve the long-term temperature goal set out in Article 2, Parties aim to reach global peaking of greenhouse gas emissions as soon as possible, and achieve a balance between anthropogenic emissions by sources and removals by sinks of greenhouse gases in the second half of this century, on the basis of equity, and in the context of sustainable development.” Countries, including the European Union, China and the United States, which has rejoined the Paris Agreement, have actively proposed and updated climate governance goals and launched climate action, showing the international trend of global concerted response to climate change.

1 Background of Global Cooperation in Carbon Peaking and Carbon Neutrality 1.1 The Process of Global Climate Governance Since the conclusion of the United Nations Framework Convention on Climate Change (hereinafter referred to as the Convention) in Rio de Janeiro, Brazil, in 1992, the international community has entered into continuous negotiations on the refinement of and implementation of the Convention, generally including the periods W. Mou (B) · C. Ying Research institute for Eco-civilization, Chinese Academy of Social Sciences, Beijing, China e-mail: [email protected] X. Yuan China Meteorological Administration, Beijing, China Z. Yongxiang National Climate Center, China Meteorological Administration, Beijing, China © China Financial & Economic Publishing House 2023 G. Zhuang and H. Zhou (eds.), China’s Road to Carbon Peaking and Carbon Neutrality, https://doi.org/10.1007/978-981-99-3122-4_13

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of 1995–2005, 2006–2012, 2013–2015, and 2015 to the present. Landmark achievements such as the Kyoto Protocol, the Cancun Agreement, and the Paris Agreement have been made. 1995–2005: negotiation, signing and entry into force in respect of the Kyoto Protocol. The Kyoto Protocol is the first phased performance agreement since the adoption of the Convention. Since the Convention only stipulates the overall targets and principles of global cooperative action without setting specific targets for global and country-specific actions at different stages, the UNFCCC Conference of the Parties authorized negotiations on the Kyoto Protocol in 1995, and clarified phased global emission reduction targets, as well as tasks undertaken by countries and the models of international cooperation. As the first performance agreement of the Convention, the Kyoto Protocol took a long time from negotiations to entry into force. It suffered setbacks such as the protocol signing and quitting by the United States, and the high asking price for emission allowances by countries like Russia before finally coming into force in 2005. It clarified the phased emission reduction tasks and targets for all parties to the Convention from 2008 to 2012. Under the Kyoto Protocol, the countries stipulated in the Convention (Annex I) are divided into developed countries and countries with economies in transition. As a result, countries fall into three categories: developed countries, developing countries and countries with economies in transition. 2006–2012: the international climate regime for 2013–2020 was established after negotiations. The Bali Road Map was adopted at the 2007 UN Climate Change Conference in Bali, Indonesia, launching a process of negotiating the post-Kyoto Protocol international climate regime, which covers the implementation period of 2013–2020. According to the Bali Road Map, negotiations should be concluded at the Conference of the Parties in 2009, but the General Assembly failed to adopt the Copenhagen Accord. At the meeting held in Cancun in 2010, the main consensus of the Copenhagen Accord was included in the Cancun Agreements adopted by the Conference 2010. In the following two years, the responsibilities and action targets of all parties for emission reductions were clarified in the form of “decisions” by the Conference of the Parties, thereby establishing a post-2012 international climate regime. The Copenhagen Accord, the Cancun Agreements, etc. no longer differentiated between countries in Annex I and those not covered by Annex I. Due to the eastward expansion of the EU, the definition of countries with economies in transition was basically abolished. 2013–2015: the Paris Agreement was negotiated and the post-2020 international climate regime was basically established. In 2011, the seventeenth session of the Conference of Parties (COP 17) to the UNFCCC held in Durban, South Africa, authorized the start of the Durban Platform negotiation process for the “post-2020 international climate regime”. According to the “bottom-up” action logic set by the Obama administration during the Copenhagen Accord negotiations, the 2015 Paris Agreement no longer emphasizes the distinction between north and south countries. The legal expression “Nationally Determined Contributions” is adopted, and the difference in self-positioning by countries can be seen through the difference in

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contributions, thus establishing a global climate governance paradigm in which all countries act in concert. Since 2016, negotiations have been conducted on the rules concerning the refinement and implementation of the Paris Agreement. In the meantime, the international climate governance process was negatively affected by changes in government in the United States, Brazil and other countries. At the UN Katowice Climate Change Conference held in 2018, the Parties reached a basic consensus on the mechanisms and rules of the Paris Agreement concerning Nationally Determined Contributions, mitigation, adaptation, financing, technologies, capacity-building, transparency, global inventory, etc., and made further arrangements on the implementation of the Paris Agreement and greater global response to climate change.

1.2 The Major Mechanisms of Global Climate Governance Global climate governance is a model of international cooperation in which sovereign countries, with the involvement of multiple stakeholders, respond to climate change through the Convention mechanism and non-Convention mechanisms. To some extent, tackling climate change and controlling greenhouse gas emissions may limit development, and harm the economic and political interests of all countries. It may also become a key area of international cooperation. Human society must rationally tackle climate change through international institutional arrangements. The responsibilities of all countries must be clearly defined, and international cooperation is needed to promote the development of human society while protecting the global climate. Mankind has begun institutional and law-based response to climate change through activities that range from the first World Climate Conference by the World Meteorological Organization (WMO) in 1979 which called for the protection of the global climate, to the opening of international climate negotiations in 1990. International cooperation mechanisms to tackle climate change primarily fall into two categories: Convention mechanisms and non-Convention mechanisms. Non-Convention mechanisms include regular, irregular, international, regional, industrial and professional mechanisms. All mechanisms with different positioning and functions perform different roles and functions in international cooperation on climate change. Participants in global climate governance include sovereign governments, intergovernmental international organizations, non-state actors, and so on. Sovereign governments are the principal parties and governance bodies, participating in global climate governance through climate negotiations, with consideration to their own demands and development status. Intergovernmental international organizations are to coordinate the interests of all countries, with the Secretariat of the UNFCCC as the center. These also include the Intergovernmental Panel on Climate Change (IPCC), the United Nations Environment Programme (UNEP), the Clean Energy Ministerial (CEM) and other related organizations. Non-state actors include non-governmental organizations (NGOs), social groups, enterprises and individuals relating to climate

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change. On the one hand, they participate in climate governance events such as international negotiations to influence government decision-making. On the other hand, they are mainly responsible for implementing action in the global climate governance system.

1.2.1

The UNFCCC and Its Related Mechanisms

The core of the operation mechanism of global climate governance is the United Nations Framework Convention on Climate Change (UNFCCC). On the basis of a clear knowledge about the scientific nature of climate change issues as well as consensus, sovereign countries, under the coordination of the UNFCCC secretariat, enter into climate negotiations pursuant to the principles of “common but differentiated responsibilities” and “respective capabilities”, supported by non-Convention political, economic and technical mechanisms. Sovereign states, intergovernmental international organizations and non-state actors are the main participants, thus gradually forming a complex pattern featuring multi-player competition at multiple levels. They cooperate and mutually influence one another to promote the realization of global climate governance goals. The UNFCCC, aiming “to achieve stabilization of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system”, stipulates that developed and developing countries shoulder common but differentiated responsibilities. Each Party is obliged to take action to tackle climate change, but developed countries have a historical and practical responsibility for climate change and should assume more obligations, whereas developing countries have the primary tasks of developing economies and eliminating poverty, but must also take steps to reduce greenhouse gas emissions, and pursue low-carbon development. Since the UNFCCC only sets targets for greenhouse gas emission reductions in general terms, it is not legally binding and the obligations are soft ones. As a result, the ultimate objectives of the UNFCCC cannot be achieved. Accordingly, the first Conference of the Parties (COP-1) held in 1995 decided to negotiate a legally binding protocol. The landmark Kyoto Protocol to the United Nations Framework Convention on Climate Change (“Kyoto Protocol”) was reached at the third Conference of the Parties (COP-3) held in Kyoto, Japan, in 1997. For the first time, the Kyoto Protocol sets legally binding quantitative emission reduction targets for countries listed in Annex I (developed countries and countries with economies in transition), and introduces three flexible mechanisms: emissions trading (ET), joint implementation (JI) and the clean development mechanism (CDM). The 13th Conference of the Parties (COP-13) held in Bali, Indonesia in 2007 adopted the Bali Action Plan, outlining a road map and basic framework for establishing a post-2012 international climate regime, which pulled the United States back to the negotiating table. The 17th Conference of the Parties held in Durban, South Africa, in 2011 formed the Durban mandate, which launched the negotiations on the post-2020 international climate regime; participants discussed how to step up actions to reduce emissions by 2020.

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The 18th Conference of the Parties held in Doha in 2012 implemented the second commitment period of the Kyoto Protocol, and all parties including the United States reached a consensus on emission reduction targets, adaptation mechanism, financial mechanism and technical cooperation mechanism before 2020, and adopted the resolution document on Ad Hoc Working Group on Long-term Cooperative Action under the Convention (AWG-LCA). The Paris Agreement, which was adopted at the Paris Conference in 2015 under the promotion of all parties including the United States and China, basically clarifies the institutional arrangements and cooperation models for international climate governance for the 2020–2030 period. The 25th Conference of the Parties, held in Madrid, Spain, in 2019, adopted the implementation rules on major issues of the Paris Agreement, except the content related to Article 6 “Carbon Market” of the Paris Agreement.

1.2.2

Non-Convention Mechanisms

In order to facilitate the negotiations on the Convention, the Parties have conducted many activities and practices outside the Convention system. These cooperation mechanisms complement the Convention mechanism, playing a positive role in enhancing mutual understanding and consensus-building among the Parties. In terms of nature, these mechanisms can be divided into three types: political mechanisms, technical mechanisms and economic incentive mechanisms. First, non-Convention mechanisms of an international political attribute, including the United Nations Climate Change Summit, the Millennium Development Goals Forum, the Major Economies Forum on Energy and Climate, the G20, the G7, and the APEC Conference. These mechanisms share a common feature: heads of government or high-level officials participate in negotiations and reach political consensus on major issues, but generally do not discuss technical details. Political non-Convention mechanisms such as the UN Climate Change Summit usually play a key role in holistic, long-term and political issues. The high-level meetings, particularly the summit, can often solve some major problems that are an obstacle to the negotiations of technical groups under the Convention, thereby facilitating negotiations. Second, technical non-Convention mechanisms in industries or sectors, mainly including cooperation mechanisms for the International Civil Aviation Organization, the International Maritime Organization and the United Nations Secretary-General’s High-level Advisory Group on Climate Change Financing. Under these mechanisms, special studies and discussions are conducted on industries, sectors or specific issues involved in the Convention negotiations. The results of discussion and recommendations are fed back to the Convention to facilitate negotiations on relevant issues under the Convention. These mechanisms have limitations in the following areas: first, climate change is not the main business of these institutions or mechanisms, and their focus of attention and purposes may differ from those of the Convention. Second, different mechanisms have their own rules of order and guiding principles, and the rules and principles observed by different institutions may differ from the Convention, resulting in different understanding.

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Third, economic incentive/binding non-Convention mechanisms, including climate change-related trade mechanisms, setting of production standards related to production activities as well as domestic and foreign market development, etc. Economic incentives are an auxiliary negotiation topic under the Convention negotiations, and the negotiations are mostly not the key concern of the Convention, but these issues are closely associated with the performance of the real economy as well as the interests of related industries and fields. Mechanisms for trade, setting standards, etc. have been developed for a long time, and have been in place for longer than international governance mechanisms for climate change issues. However, after the emergence of climate change governance mechanisms, there are problems such as blurred boundaries and principled differences among various mechanisms. Therefore, discussions and negotiations on climate change issues under these mechanisms cover not only technical issues, but also political and principled issues.

1.3 The Objectives and Main Features of the Paris Agreement The Paris Agreement is the performance agreement for the current period (2021– 2030) under the Convention. The Paris Agreement was reached at the 21st Conference of the Parties held in December 2015 and entered into force on November 4, 2016. The Paris Agreement is an international climate agreement reached by representatives of 195 Parties under the framework of the United Nations after many rounds of negotiations, covering greenhouse gas emission reductions and climate change adaptation since 2020 as well as international financial mechanisms. It is the third milestone international treaty for the international community to tackle climate change and achieve the Sustainable Development Goals for mankind, after the Convention in 1992 and the Kyoto Protocol in 1997. The long-term objective of the Paris Agreement is to hold the increase in the global average temperature to well below 2°C above pre-industrial levels and pursue efforts to limit the temperature increase to 1.5°C above pre-industrial levels, recognizing that this would significantly reduce the risks and impacts of climate change. The Paris Agreement is a legal instrument for the post-2020 international climate regime reached to achieve the goals of the UNFCCC under the evolving international economic and political pattern. The institutional framework established primarily includes the following areas.

1.3.1

Reaffirm the leadign role of Developed Countries in International Climate Governance

Given the changed international economic and carbon emission pattern, developed countries hope to remove the boundaries between North and South countries in terms

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of responsibility, and require all countries to jointly share the responsibility for tackling climate change under a unified emission reduction and monitoring framework. In fact, they hope to transfer the responsibilities and obligations of tackling climate change to developing countries. The stance of the developed countries is opposed by the developing countries, but the latter also demonstrates great readiness to cooperate and flexibility. The Paris Agreement finally recognizes the differences between North and South countries as well as among countries, reflecting different responsibilities and obligations of the Parties. It basically refuted the developed countries’ plan to promote the convergence of responsibilities. The principle of common but differentiated responsibilities is reiterated and emphasized in different paragraphs of the text, thus laying the groundwork for the participation of developing countries in international climate governance on a fair and active footing. At the same time, it has expanded the action by developing countries in breadth and scope.

1.3.2

Adopt a Bottom-Up Architecture for Commitment to Ensure Maximum Engagement

In line with the consensus reached in the Copenhagen Accord, the Parties to the Paris Agreement independently propose contribution targets such as emission reductions in light of their own economic and social development. Precisely because countries can put forward contribution targets based on their own conditions and willingness to act, many Parties that previously had not put forward nationally determined contributions (NDCs) were encouraged to set NDCs. This ensures a high level of engagement in the Paris Agreement. Moreover, NDCs proposed by each party are more achievable.

1.3.3

Establish a Model for Both Obligatory and Voluntary Funding

The Paris Agreement makes clear the responsibilities and obligations of developed countries for providing funding, and takes into consideration the demands of developing countries for differentiated funding obligations. Not only is this the respect for facts and a manifestation of the difference between North and South countries, but also it builds the confidence of countries, particularly developing countries, to participate in international financial cooperation mechanisms. Meanwhile, the Paris Agreement encourages all Parties to provide voluntary funding support to developing countries to tackle climate change. In addition to helping consolidate the existing funding channels, these initiatives expand a governance model of more diversified funding based on mutual trust.

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Establish a Legal Form in Line with International Political Reality

To some extent, the form of a climate agreement demonstrates the political will of countries as well as the level of global environmental awareness. The international community reached the Kyoto Protocol in 1997, stipulating that the Convention is executed in the strict legal form of a “Protocol”. By 2015, the international community had a significantly better capacity to tackle climate change compared with that in 1997, and major emitters such as China and the U.S. made a shift from conservative participation in the international climate governance process to active efforts to tackle climate change. It should be said that the Parties are more willing and more able to tackle climate change. If, in this context, the Paris Agreement is not legally binding, it will not meet the needs of the growing global environmental awareness and will be out of step with the logic of positive action by various countries. Therefore, although the Paris Agreement is not named as a “Protocol”, it meets the criteria of a legally binding international treaty from the perspective of its content, architecture, ratification procedures and other arrangements. When the ratifying countries meet certain conditions, the Paris Agreement will enter into force and become an international law to regulate the post-2020 global climate governance action. The Paris Agreement is not named as a “Protocol” because of the following reasons: on the one hand, because the NDCs are not included in the body of its text, but in the “schedule” outside the Paris Agreement. As a result, it differs from a protocol in terms of function and role. On the other hand, the title of “agreement” simplifies the procedures of ratification for some countries compared with a “protocol”, thereby facilitating the process of ratification.

1.3.5

Establish a Global stock-take (GST) mechanism to Dynamically measure global efforts

In order to ensure efficient implementation and help NDCs meet the needs of global long-term emission reduction targets, the Paris Agreement has mandated to establish GST mechanism to measure global efforts for realizing Paris Agreement Targets, which is conducted every five years. The GST monitors and evaluates the realization of NDCs of countries, and may also be used to find the gap between the world emission reduction efforts and the IPCC’s target of holding temperature rise below 2°C or even 1.5°C, and, on the basis of the gap, urges all countries to increase emission reduction efforts or propose new emission reduction targets. The GST mechanism will be a guarantee that all countries continuously step up their efforts, review the adequacy of their actions, and achieve the goals of the Agreement and the Convention after putting forward the targets of their NDCs. Since the GST mechanism is targeted at the NDCs, the inventory should be conducted in an open and facilitative manner rather than in a mandatory way. The GST mechanism, in conjunction with transparency rules as well as the Agreement’s compliance mechanism, puts pressure on countries that do not adequately perform NDCs or are too conservative about their

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NDCs, thus urging them to make a greater contribution. The GST mechanism is an innovation compared to previous climate agreements. It can promote and encourage proactive countries to realize their potential and step up efforts, and also give an opportunity to countries with conservative NDCs to update their targets and step up efforts, thereby promoting the formation of a model of dynamically updated and more active global coordinated emission reduction and governance.

2 Global Commitments to Carbon Peaking and Carbon Neutrality As the global climate governance process advances, more and more countries achieve carbon peaking and explore practical ways to decouple economic development from carbon emissions. On this basis, various countries have responded to the goal of achieving net zero emissions in the second half of the twenty-first century under the Paris Agreement. The European Union, the U.S., China and other major entities set carbon neutrality goals, and global climate governance has reached a new height.

2.1 Global Overview of Current Carbon Peaking The “carbon” referred to carbon peaking is defined differently. Some refer to it as carbon dioxide produced during the combustion of fossil fuels, such as China’s carbon peaking target under the Paris Agreement. Some refer to it as carbon emissions of carbon dioxide equivalent converted from a variety of greenhouse gases. The significance of discussing carbon peaking is to judge the trend of a country’s carbon emissions, and explore paths to achieve low-emission economic and social development. However, the premise is that countries that have achieved carbon peaking have experienced economic growth and achieved a high level of wealth accumulation and social welfare. It is of little significance for countries with low levels of human development and low income to achieve carbon peaking: first, the per capita emissions of these countries are very low. From the perspective of emissions fairness, there should be a right to greater emissions. Second, the future development of these countries is greatly uncertain. The currently observed peak is likely to be a phased peak as society and economy develop. According to the data on carbon dioxide emissions by countries and regions in the world from 1750 to 2019, and an analysis of the carbon dioxide emission trends in countries and regions above the World Bank’s standards high-income countries, by the end of 2019, a total of 46 countries and regions had achieved carbon peaking (see Table 13.1). These are primarily developed countries, but also some developing countries and regions.

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Table 13.1 Peaking time and peak value for countries and regions that achieved carbon peaking by the end of 2019 Peaking time (year)

Country and region

Peak value (10,000 tons)

Peaking time (year)

Country and region

Peak value (10,000 tons)

1969

Antigua and Barbuda

126

2003

Finland

7266

1970

Sweden

9229

2004

Seychelles

74

1971

Britian

66,039

2005

Spain

36,949

1973

Brunei

997

2005

Italy

50,001

1973

Switzerland

4620

2005

U.S

613,055

1974

Luxembourg

1443

2005

Austria

7919

1977

Bahamas

971

2005

Ireland

4816

1978

Czech Republic

18,749

2007

Greece

11,459

1979

Belgium

13,979

2007

Norway

4623

1979

France

53,028

2007

Canada

59,422

1979

Germany

111,788

2007

Croatia

2484

1979

Netherlands

18,701

2007

Taiwan, China

27,373

1984

Hungary

9069

2008

Barbados

161

1987

Poland

46,373

2008

Cyprus

871

1989

Romania

21,360

2008

New Zealand 3759

1989

Bermuda Triangle

78

2008

Iceland

382

1990

Estonia

3691

2008

Slovenia

1822

1990

Latvia

1950

2009

Singapore

9010

1990

Slovakia

6163

2010

Trinidad and Tobago

4696

1991

Lithuania

3785

2012

Israel

7478

1996

Denmark

7483

2012

Uruguay

859

2002

Portugal

6956

2013

Japan

131,507

2003

Malta

298

2014

Hong Kong SAR, China

4549

Note ➀ Latest World Bank standards for high-income countries are available on https://datahelpdesk. worldbank.org/knowledgebase/articles/906519-world-bank-country-and-lending-groups. ➁ Peak value is carbon dioxide emissions in the peaking year (excluding land-use change) Source Public statistics from Our World in Data

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2.2 Global Commitments to Carbon Neutrality With the support of the UNFCCC Secretariat and the UNDP, the Climate Ambition Alliance, initiated by Chile and Britain, calls on all countries to commit themselves to achieving carbon neutrality by 2050. According to the statistics from Energy & Climate Intelligence Unit, a British non-profit organization, 127 countries and regions have set or promised to set carbon neutrality goals in different forms such as legislation, proposed laws, and policy documents (see Table 13.2). Suriname and Bhutan have already achieved carbon neutrality due to low industrial carbon emissions and extensive forest cover. More and more countries regard carbon neutrality as a key strategic goal and take active steps to tackle climate change.

3 Global Cooperation in Carbon Peaking and Carbon Neutrality 3.1 Strengthen Scientific Research and Promote Cognition The issue of climate change is one of the global environmental issues of general concern to the international community. The global response to climate change is not only a scientific issue, but also an international political and economic issue. The IPCC provides a scientific basis as well as possible policy proposals for global climate governance by summarizing and evaluating the latest research findings on climate change on a global scale. IPCC assessment reports have become key scientific support for global negotiations on climate change, playing a key role in the process. IPCC assessment reports are a scientific basis for governments to prepare policies and actions to tackle climate change, and a summary of the phased outcomes of climate change science. It also offers an important way for the general public to learn about climate change.

3.1.1

The IPCC Provides Scientific Support for International Climate Governance

The conclusions of five IPCC assessment reports on changes in the climate system, causes of change, risks to climate change, the urgency of climate change adaptation, paths to achieving temperature control objectives, etc. increasingly focus on the realization of the Convention goals. Judging from the dynamic process of the two, the IPCC supports international climate governance on the basis of science. The first IPCC assessment report, released in 1990, systematically assessed the latest progress in the science of climate change and laid a scientific foundation for international climate governance for the first time. It promoted at the 1992 United Nations Conference on Environment and Development (UNCED) the adoption of the UNFCCC, the

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Table 13.2 Carbon neutrality targets set by major countries and regions in the world Country/Party

Nature of commitment

Committed time for achieving carbon neutrality

Suriname

—

Achieved

Bhutan

—

Achieved

Denmark

Legislation completed

2050

France

2050

Hungary

2050

New Zealand

2050

Sweden

2045 2050

Britain Canada

Law proposal

2050

Chile

2050

EU

2050

Spain

2050

South Korea

2050

Fiji Finland

2050 Policy paper

2035

Austria

2040

Iceland

2040

Japan

2050

Germany

2050

Switzerland

2050

Norway

2050

Ireland

2050

South Africa

2050

Portugal

2050

Costa Rica

2050

Slovenia

2050

Marshall Islands

2050

United States

2050 (Biden’s campaign promise)

China

2060

Singapore

The second half of the twenty-first century

Dozens of other countries

Under policy discussion

2050

Source Energy & Climate Intelligence Unit, https://eciu.net/netzerotracker; Climate Ambition Alliance: Net Zero 2050, https://climateaction.unfccc.int/

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first framework international document aimed at controlling greenhouse gas emissions and tackling global warming. It also clarified Article 2 of the Convention. Although the IPCC Second Assessment Report, released in 1995, was somewhat questioned, it provided scientific support for the conclusion of the Kyoto Protocol in 1997. The IPCC’s Third Assessment Report (TAR) assessed climate change impact region by region, and the issue of “adaptation” in the UNFCCC negotiations was put on a par with “mitigation” as a topic of addressing climate change. The IPCC’s Fourth Assessment Report (AR4), released in 2007, began to attach equal importance to temperature rise and greenhouse gas concentration, and comprehensively assessed the future climate change trend under different concentrations of greenhouse gases, which laid a scientific foundation for 2°C being used as a long-term temperature rise target for tackling climate change. Although the Copenhagen Accord reached in 2009 is not legally binding, the goal of temperature rise by 2°C has been generally recognized by the international community. The IPCC’s Fifth Assessment Report (AR5), completed in 2014, ascertained the facts of global warming and the significant impact of human activities on the climate system, laying a scientific basis for the conclusion of the Paris Agreement at the Paris Climate Change Conference. Judging from the specific content, the IPCC has increased its understanding of different scientific issues through successive assessments, which have laid a scientific basis for international climate governance and explored new methods and paths. According to IPCC reports: First, the scientific basis and urgency of tackling climate change were clarified. It has extended from several elements such as the initial surface temperature, sea level altitude, and greenhouse gas concentrations to dozens of climate indicators in the five circles of the climate system. It emphasizes the fact that the global climate system is warming with a growing trend. Second, affirm the human activities as the main cause of global warming since the mid-twentieth century from the perspective of attribution, and strengthen the need to cut anthropogenic emissions. In addition to factors such as surface temperature, sea level altitude, snow cover and sea ice, interference of human activities has also been discovered in some extreme weather events. Moreover, interference of human activities becomes increasingly more reliable. Third, the cognition of the impact and risks of climate change further testifies to the importance of the target of a 2°C temperature rise. From the global impact to the regional and sector impact, eight types of key risks are given under the temperature rises from 1°C to 4°C. Fourth, there are both abundant opportunities and deficits in adapting to climate change. This limitation provides a theoretical basis for negotiations on the loss and damage issue, and the universality and regionality of the adaptation issue affect the implementation of the principle of “common but differentiated responsibilities”. Fifth, focus on the transition path put forward by the Convention to achieve sustainable goals, and offer the overall industry, technical distribution, social and economic costs to achieve the 2°C temperature control goal, as well as institutional and policy choices that support transformation. The IPCC’s five assessment reports also mention a number of valuable concepts and implementation tools. For example, the second assessment report puts forward the idea of using the carbon market mechanism to foster global mitigation cooperation. The third assessment report attempts to answer important questions like

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“How will development models affect future climate change?”, “How will climate change adaptation and mitigation affect the prospects of sustainable development?” and “How can climate change response policies be integrated into sustainable development strategies?” After 2016, in order to achieve the goals of the Paris Agreement, the IPCC conducted an assessment of the risk of a 1.5°C temperature rise as well as the realization path, proposed establishing an effectively integrated carbon budget management framework, strove to avoid the harm caused by anthropogenic greenhouse gas emissions to the climate system, and used its scientific and policy connotations to facilitate negotiations and step up efforts, and promote the realization of global emission reduction goals under a new climate governance model.

3.1.2

Ways of Interaction Between Scientific Cognition and International Climate Negotiations

As the most influential scientific assessment organization in the field of climate change, the IPCC exerts its global impact primarily through three ways: the design and generation of knowledge, the diffusion of knowledge and the consumption/ acceptance of knowledge. The conclusions of IPCC assessment reports have a key impact on the UN climate negotiation process, as evidenced by the close relationship between science and politics and their independence. To begin with, IPCC’s scientific research provides a problem dimension and debate area for political and interest competition in the climate negotiations among countries. In other words, the IPCC assessment report is used as a premise for the competition of interests in international climate negotiations. Second, IPCC studies promoting consensus on global climate governance and providing scientific support for the evolving international climate governance. At the same time, the UN negotiations on climate change underscore scientific research on climate change from the demand side. Finally, in terms of climate negotiations, the IPCC’s research findings are affected to some extent by political interests. This interaction relationship can be divided into two types: positive interaction and negative interaction. Positive interaction includes models of spawning and promotion as well as the model of mutual coordination, while there are three models of negative interaction: parallel development, negation and mutual destruction.

3.2 Consolidate Multilateral Cooperation Mechanism and Principles of Cooperation Featuring the Convention China is a staunch supporter of the multilateral cooperation model with the United Nations as the chief platform in the process of international climate governance. Chinese President Xi Jinping delivered a key speech at the Leaders Summit on Climate held on April 22, 2021, in which he explored the root causes of global

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issues such as climate change from the angle of human civilization. The Industrial Revolution has created wealth but also given rise to a host of global problems such as climate change and the biodiversity crisis. The problem of climate change is not an isolated incident, but a manifestation of the deep-rooted structural imbalance between man and nature since the Industrial Revolution. In this context, President Xi Jinping put forward the proposition of “six commitments”1 based on the thinking on promoting ecological progress, and briefly yet profoundly clarified China’s concept and plan for the global response to climate change. First, committed to the harmonious coexistence between man and nature. It is to directly tackle the deep-seated imbalance in industrial civilization, and stress the fostering of a community of life for man and Nature. This is the essence of Xi Jinping’s Thought on Ecological Civilization, occupying the moral high ground from the angle of sustainable human development. Second, committed to green development. The scientific idea that “lucid waters and lush mountains are invaluable assets” reveals a profound insight that green development is the prevailing direction of technological revolution and industrial change in the contemporary era. Despite a host of challenges to green transition, it should be seen that the world trend is irresistible, and that only through innovation-driven sustainable development can we seize the major opportunities presented by green transition and development. Third, committed to systemic governance. Mountains, rivers, forests as well as farmlands, lakes, grasslands and deserts are elements of ecosystems. These are interdependent, and a vital part of the climate system. Based on the comprehensive thinking of the ecosystem, we must place a high value on boosting the circulation capacity of ecosystems and maintaining the ecological balance in the process of environmental protection. Fourth, committed to putting people first. The eco-environment is the most inclusive benefit for people’s wellbeing, and the green transition is carried out for the interests of sustainable development of mankind. This is a key starting point of Xi Jinping’s Thought on Ecological Civilization. The emphasis on seeking a synergy for protecting the environment, developing the economy, creating jobs and eliminating poverty, and working to uphold social fairness and justice in green transition reflects the fundamental purpose of serving the people wholeheartedly as well as the distinctive features of China’s plan. Fifth, committed to multilateralism. Global climate change is a common challenge for mankind, and tackling climate change is a rare and stable “greatest common denominator” among the differing interests of all countries. The goal of carbon neutrality inaugurates a new journey towards global green and low-carbon development. We work on the basis of international law, follow the principle of equity and justice, and focus on effective actions. We need to uphold the UN-centered international system, and work together to promote global environmental governance. The reopening of climate cooperation between China and the United States is undoubtedly a positive message for the global response to climate change. However, the 1

Xi Jinping (2021).

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current difficulties in international environmental governance are patently obvious. Relations among major powers remain strained, and there is no political trust. Climate policies in some countries change from time to time according to changes in government. Some countries weaken or evade international obligations, and even threaten unilateral measures. In view of this, China takes an unambiguous position: “We must join hands, not point fingers at each other; we must maintain continuity, not reverse course easily; and we must honor commitments, not go back on promises.”2 Sixth, committed to the principle of common but differentiated responsibilities. The principle of common but differentiated responsibilities is not only a basic principle established by the UNFCCC adopted in 1992, but also a basic guideline for international cooperation in the field of sustainable development worldwide. We should reaffirm that the principle of common but differentiated responsibilities is a key cornerstone of international climate governance, stress the multiple challenges, key contributions, special difficulties and concerns of developing countries, and call on developed countries to help developing countries promote green, low-carbon transition in terms of funding, technology, capacity building, etc., and not to erect green trade barriers. It is intended to promote the solidarity and cooperation of developing countries and protect the legitimate rights and interests of developing countries in development. It shows China’s basic political stance of standing side by side with other developing countries.

3.3 The Promotion of Ecological Progress Leads to Cooperation in Global Climate Global climate governance plays a key part in promoting global ecological progress and is also an important field for building a community with a shared future for mankind. Achieving leadership in climate governance and the global ecological conservation was written into the report of the 19th CPC National Congress for the first time, which points out that “taking a driving seat in international cooperation to respond to climate change, China has become an important participant, contributor, and torchbearer in the global endeavor for ecological civilization.”3 China has also shown the world that it will participate in global environmental governance and honor commitments to emission reduction. In May 2016, the UNEP released a report entitled Green is Gold: The Strategy and Actions of China’s Ecological Civilization, which introduces China’s guiding principles, basic concepts and measures for ecological conservation, points out China’s practices and experiences in incorporating ecological conservation into national development plans, and demonstrates China’s determination to pursue a new paradigm of development of industrial civilization by 2

Xi Jinping (2021). Academy of Party History and Literature of the CPC Central Committee, Selected Important Documents Since the 19th CPC National Congress (Part I), Central Literature Publishing House, 2019 edition, p. 4. 3

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relying on the green, low-carbon and circular development, sharing China’s wisdom, contributions, and strength towards global ecological security and sustainable development. Global climate governance is characterized by a long-term, comprehensive, complex nature. Promoting ecological conservation and leading global climate governance are major issues for China to participate in global climate governance under new circumstances, and are important for paradigm transformation in global climate governance. China should, in light of its national conditions, take the initiative to explore and innovate, effectively combine leadership and guidance, and promote the orderly development of and make practical results in global climate governance. First, defend global climate governance justice. The report of the 19th CPC National Congress states that mankind faces the challenges of the spreading nontraditional security threats in many fields such as climate change, and global climate governance has become a common task for the international community. However, Western developed countries have always been dominant in the traditional global governance system and striven to have a leading say in the field of climate governance. As the world’s second largest economy and the largest developing country, China stands side by side with other developing countries in participation in global governance, upholds global climate governance justice, strives for a bigger say for developing countries, takes the initiative to put forward climate governance propositions that are in line with the historical logic of climate change response, the development level of all countries, and the interests of developing countries, and expresses the interests and demands of developing countries in the formulation of international climate governance rules to uphold global climate governance justice. Second, facilitate global climate governance mechanisms. China’s proactive efforts to promote the adoption of the Paris Agreement are praised by the international community, but the United States’ unilateral withdrawal from the Paris Agreement brought uncertainty to global climate governance. There is an urgent need for the Parties to negotiate and formulate more specific and detailed global climate governance rules on mitigation, adaptation, as well as financial and technical support on how to achieve the objectives of the Paris Agreement. China should continue to uphold the principle of common but differentiated responsibilities as well as respective capabilities, bear in mind the building of a community with a shared future for mankind as well as common interests, actively promote international consultations on an equal footing, advocate and promote the preparation of new rules for global climate governance, effectively promote all countries, particularly developed countries, to honor their responsibilities for climate governance in accordance with the Agreement, and facilitate the effective implementation of corresponding measures. Third, actively contribute to global climate governance. The report of the 19th CPC National Congress shows the world that China will actively participate in global environmental governance and honor its commitments to reducing emissions. According to the Nationally Determined Contributions submitted by China under the Paris Agreement, China will achieve carbon peaking around 2030 and strive to achieve it as soon as possible. In September 2020, President Xi Jinping delivered a key speech at the general debate of the 75th session of the UN General Assembly: “China will scale up its NDCs by adopting more vigorous policies and measures, strive to

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peak CO2 emissions before 2030, and achieve carbon neutrality before 2060.”4 In order to fulfill the commitments, China has made overall plans and arrangements for pursuing green development, solving prominent environmental problems, strengthening ecosystem protection, reforming the eco-environment regulatory system, etc., and has put forward initiatives for “carrying out cooperation in green economic and trade activities, technology and finance, promoting the implementation of the green ‘Belt and Road’, etc.” China’s positive contributions in the field of global climate governance set a good example for the international community and help the international community recognize China’s leadership in global climate governance. Fourth, cooperate in global climate governance. Global climate governance is a common task of the international community. Achieving the objectives of global climate governance requires extensive and sustained cooperation with the international community. Since 2014, China has fostered cooperation with other developed countries in climate change in a more active and open manner through the Group of Twenty (G20) Leaders’ Summit, the BRICS Leaders’ Summit, APEC, as well as China-U.S. Dialogue, China-EU Dialogue, China-France Dialogue, etc., which resulted in outcome documents such as the China-U.S. Joint Announcement on Climate Change, the China-EU Joint Statement on Climate Change, and the Joint Statement on Climate Change by Heads of State of China and France. These bring dynamism into global cooperation in the field of climate change, and demonstrate China’s more flexible and pragmatic stance in climate diplomacy. After the Paris Agreement comes into force, developing countries face more challenges in climate change mitigation and adaptation. China needs to proactively assume international obligations in line with China’s national conditions, stage of development and actual capacity. Moreover, China must advocate the cooperation with the international community for climate change response, foster North–South cooperation on climate change, capitalize on China’s South-South Cooperation Climate Fund to help other developing countries boost their capacity to tackle climate change, promote more developed countries to provide support to developing countries, facilitate the transfer of climate governance technologies by the international community to developing countries and support developing countries in the R&D and application of technologies to aid the development of the green economy. Fifth, make scientific and technological innovations in global climate governance. The key to making breakthroughs in the global response to climate change is to rely on scientific and technological advancement. Developing countries have played a vital role in global carbon emission reductions after the Paris Agreement entered into force, but lack advanced technologies to achieve emission reduction goals. In comparison, developed countries hold many advanced technologies but these are only used on a limited scale. On the one hand, China should boost technological innovations in response to climate change, and strengthen the R&D, application and promotion of technologies for low-carbon and green development, such as energy saving and consumption reduction, renewable energy and advanced nuclear energy, and carbon 4

“Xi Jinping Delivers Important Speech at the General Debate of the 75th Session of the UN General Assembly,” People’s Daily, September 23, 2020.

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capture, utilization and storage (CCUS). On the other hand, it should leverage stateof-the-art technology to deepen international cooperation, facilitate North–South dialogue, communication and coordination, promote the international community to establish a technical cooperation mechanism that better meets the needs of safeguarding global climate security, and promote in-depth research, promotion and application in respect of global climate governance technologies. Sixth, be a rational torchbearer in global climate governance. China has gained a bigger say over climate governance since the Copenhagen Climate Conference, and plays an increasingly pivotal role in shaping the new mechanism for global climate governance. However, China must be soberly aware that as a developing country, China lags far behind developed countries in terms of comprehensive national strength, and it has inadequate economic and social development, as well as many outstanding problems, and is not capable of leading global climate governance alone. Therefore, in global climate governance, we should maintain strategic focus, play a constructive role, and act according to our abilities, without making commitments or assuming responsibilities beyond our reach. We should uphold the basic principle of “common but differentiated responsibilities” and promote more inclusive, pragmatic and constructive global climate governance. In brief, China has improved its hard power and soft power in the process of participating in and advancing global climate governance. It has become a pillar force for safeguarding the interests of developing countries, and effectively promoted a more just, reasonable and orderly global climate governance. Meanwhile, we should wake up to the significant changes in global climate governance in terms of topics, responsibilities, entities, organizational methods and architecture. China must boost its own governance capabilities by promoting ecological conservation, improve the level of governance, and contribute to the orderly global climate governance. In June 2021, at the invitation of Beijing Mandarin Panorama Co., Ltd., the editors organized experts and scholars from the Chinese Academy of Social Sciences, the Chinese Academy of Sciences, the Development Research Center of the State Council, Beijing Normal University, Shanxi University, Beijing Administration Institute, and Beijing Institute of Green Resources to compile the book China’s Approach to Carbon Peaking and Carbon Neutrality that contains twelve chapters according to the requirements of the CPC Central Committee and the State Council on carbon peaking and carbon neutrality goals. This book comprehensively introduces knowledge on carbon peaking and carbon neutrality in a fluent, concise, objective and standard manner to make the profound theories accessible to the general readers. On September 22, 2020, President Xi Jinping delivered a key speech at the general debate of the 75th session of the UN General Assembly: “China will scale up its NDCs by adopting more vigorous policies and measures, strive to peak CO2 emissions before 2030, and achieve carbon neutrality before 2060.” Achieving carbon peaking and carbon neutrality brings about a wide-ranging and profound systemic change in China’s economy and society, and is a well-thought-out strategic decision made by the CPC Central Committee. It reflects China’s responsibility to build a community with a shared future for mankind and its proactive efforts to promote high-quality development. As the representations of advanced productivity and advanced relations

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of production, Party members and cadres must gain a deep understanding of the concept of carbon peaking and carbon neutrality in an all-round and systematic way, and act proactively and consciously to achieve the “dual carbon” goals as soon as possible with innovative measures and a sense of responsibility. Based on the 14th Five-Year Plan period as well as the three key years of 2025, 2030 and 2060, in conjunction with the requirements of the CPC Central Committee and the State Council on “dual carbon” goals, this book expounds on China’s approach to achieving carbon peaking and carbon neutrality from an international perspective. In terms of the 12 areas of concept and connotations, practice paths, energy foundation, investment demand, technological innovation, changes in consumption, comprehensive response, carbon pricing mechanism, city leadership, goal synergy, the role of carbon sinks, and global cooperation, this book gives knowledge on carbon peaking and carbon neutrality, and has answered questions such as the deep meaning of carbon peaking and carbon neutrality, strategic considerations for the “dual carbon” goals set by China, how should China achieve the “dual carbon” goals, and the profound impact of “dual carbon” action on China and the world. It provides readers with systematic interpretations of carbon peaking and carbon neutrality from different perspectives. It dovetails with the guiding principles of the Working Guidance for Carbon Dioxide Peaking and Carbon Neutrality in Full and Faithful Implementation of the New Development Philosophy issued by the CPC Central Committee and the State Council and Action Plan for Carbon Dioxide Peaking Before 2030. This book is written in an accurate, concise and easy-to-understand manner, and is a popular expression of scientific theory. This book has been compiled with great support from Beijing Mandarin Panorama Co., Ltd. and China Financial & Economic Publishing House. This book is co-edited by Zhou Hongchun, a researcher with the Development Research Center of the State Council, as well as a prolific writer. The authors of each chapter were actively involved in discussing the main body and framework, and completed the draft in a short time and made revisions upon the suggestion of the publisher, demonstrating their active participation and a rigorous academic spirit. Specifically, the preface is written by Zhuang Guiyang, deputy director and researcher of the Research Institute for Eco-civilization of CASS; the first chapter by Chen Ying, a researcher of the Research Institute for Eco-civilization of CASS, and Zhang Yongxiang, associate researcher of the National Climate Center of China Meteorological Administration; the second and seventh chapters by Zhou Hongchun, a researcher of the Development Research Center of the State Council, Zhou Chun, the secretary-general of CABEE Clean Heating Industry Committee, and Li Changzheng, the executive vice president of Guofa Green Energy Conservation and Environmental Protection Technology Institute; the third chapter by Zhuang Guiyang, a researcher, and Dou Xiaoming, a doctoral candidate of the Department of Eco-civilization Research, University of Chinese Academy of Social Sciences; the fourth chapter by Zhang Ying, associate researcher of the Research Institute for Eco-civilization of CASS; the fifth chapter by Cong Jianhui, associate professor of the School of Economics and Management of Shanxi University, Li Rui, master degree student of the School of Economics and Management of Shanxi University, and Sun Panting, master degree student of

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the School of Economics of Shandong University; the sixth chapter by Bo Fan, lecturer of the Department of Economics of Beijing Administration Institute; the eighth chapter by Wang Wenjun, associate researcher of the Guangzhou Institute of Energy Conversion of CAS, Fu Chonghui, researcher of Shenzhen Yuntian Institute of Statistical Sciences, and Zhao Xujie, a master degree student of School of Business, Macau University of Science and Technology; the ninth chapter by Zhuang Guiyang, a researcher, and Wei Mingxin, a doctoral candidate of the Department of Eco-civilization Research, University of Chinese Academy of Social Sciences; the tenth chapter by Mao Xianqiang, Professor of Beijing Normal University School of Environment, Guo Zhi, a doctoral candidate and Gao Yubing, a research assistant; the eleventh chapter by Li Jinliang, president of Beijing Institute of Green Resources and professor-level senior engineer; the twelfth chapter by Wang Mou, researcher of CASS Research Institute for Eco-civilization, Xin Yuan, senior engineer of China Meteorological Administration, researcher Chen Ying, and associate researcher Zhang Yongxiang. Moreover, Zhang Zhining, a doctoral candidate at the University of Chinese Academy of Social Sciences, and Li Mingyao, an undergraduate student, put in painstaking efforts for the proofreading of this book. Besides citing outcomes published by the authors themselves, this book is compiled with reference to relevant works, and the citations are stated in the notes. Your forgiveness will be appreciated if relevant citations are not made! Nevertheless, many errors may have crept into this book due to my limited competence. Criticism and suggestions from readers will be greatly appreciated!

Reference Xi Jinping, “For Man and Nature: Building a Community of Life Together: Speech at the Leaders Summit on Climate,” People’s Daily, April 23, 2021.

Postscript

In June 2021, at the invitation of Beijing Mandarin Panorama Co., Ltd., the editors organized experts and scholars from the Chinese Academy of Social Sciences, the Chinese Academy of Sciences, the Development Research Center of the State Council, Beijing Normal University, Shanxi University, Beijing Administration Institute, and Beijing Institute of Green Resources to compile the book China’s Road to Carbon Peaking and Carbon Neutrality that contains twelve chapters according to the requirements of the CPC Central Committee and the State Council on carbon peaking and carbon neutrality goals. This book comprehensively introduces knowledge on carbon peaking and carbon neutrality in a fluent, concise, objective and standard manner to make the profound theories accessible to the general readers. On September 22, 2020, President Xi Jinping delivered a key speech at the general debate of the 75th session of the UN General Assembly: “China will scale up its NDCs by adopting more vigorous policies and measures, strive to peak CO2 emissions before 2030, and achieve carbon neutrality before 2060.” Achieving carbon peaking and carbon neutrality brings about a wide-ranging and profound systemic change in China’s economy and society, and is a well-thought-out strategic decision made by the CPC Central Committee. It reflects China’s responsibility to build a community with a shared future for mankind and its proactive efforts to promote high- quality development. As the representations of advanced productivity and advanced relations of production, Party members and cadres must gain a deep understanding of the concept of carbon peaking and carbon neutrality in an all-round and systematic way, and act proactively and consciously to achieve the “dual carbon” goals as soon as possible with innovative measures and a sense of responsibility. Based on the 14th Five-Year Plan period as well as the three key years of 2025, 2030 and 2060, in conjunction with the requirements of the CPC Central Committee and the State Council on “dual carbon” goals, this book expounds on China’s approach to achieving carbon peaking and carbon neutrality from an international perspective. In terms of the 12 areas of concept and connotations, practice paths, energy foundation, investment demand, technological innovation, changes in consumption, comprehensive response, carbon pricing mechanism, city leadership,

© China Financial & Economic Publishing House 2023 G. Zhuang and H. Zhou (eds.), China’s Road to Carbon Peaking and Carbon Neutrality, https://doi.org/10.1007/978-981-99-3122-4

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goal synergy, the role of carbon sinks, and global cooperation, this book gives knowledge on carbon peaking and carbon neutrality, and has answered questions such as the deep meaning of carbon peaking and carbon neutrality, strategic considerations for the “dual carbon” goals set by China, how should China achieve the “dual carbon” goals, and the profound impact of “dual carbon” action on China and the world. It provides readers with systematic interpretations of carbon peaking and carbon neutrality from different perspectives. It dovetails with the guiding principles of the Working Guidance for Carbon Dioxide Peaking and Carbon Neutrality in Full and Faithful Implementation of the New Development Philosophy issued by the CPC Central Committee and the State Council and Action Plan for Carbon Dioxide Peaking Before 2030. This book is written in an accurate, concise and easy-to-understand manner, and is a popular expression of scientific theory. This book has been compiled with great support from Beijing Mandarin Panorama Co., Ltd. and China Financial & Economic Publishing House. This book is co-edited by Zhou Hongchun, a researcher with the Development Research Center of the State Council, as well as a prolific writer. The authors of each chapter were actively involved in discussing the main body and framework, and completed the draft in a short time and made revisions upon the suggestion of the publisher, demonstrating their active participation and a rigorous academic spirit. Specifically, the preface is written by Zhuang Guiyang, deputy director and researcher of the Research Institute for Ecocivilization of CASS; the second chapter by Chen Ying, a researcher of the Research Institute for Eco-civilization of CASS, and Zhang Yongxiang, associate researcher of the National Climate Center of China Meteorological Administration; the third and eighth chapters by Zhou Hongchun, a researcher of the Development Research Center of the State Council, Zhou Chun, the secretary-general of CABEE Clean Heating Industry Committee, and Li Changzheng, the executive vice president of Guofa Green Energy Conservation and Environmental Protection Technology Institute; the forth chapter by Zhuang Guiyang, a researcher, and Dou Xiaoming, a doctor of the Department of Eco-civilization Research, University of Chinese Academy of Social Sciences, working in the High-quality Development Research Center, Beijing Academy of Science and Technology; the fifth chapter by Zhang Ying, associate researcher of the Research Institute for Eco-civilization of CASS; the sixth chapter by Cong Jianhui, associate professor of the School of Economics and Management of Shanxi University, Li Rui, master degree student of the School of Economics and Management of Shanxi University, and Sun Panting, master degree student of the School of Economics of Shandong University; the seventh chapter by Bo Fan, lecturer of the Department of Economics of Beijing Administration Institute; the ninth chapter by Wang Wenjun, a researcher of the Guangzhou Institute of Energy Conversion, CAS, Fu Chonghui, researcher of Shenzhen Yuntian Institute of Statistical Sciences, and Zhao Xujie, a research assistant of the Guangzhou Institute of Energy Conversion, CAS; the tenth chapter by Zhuang Guiyang, and Wei Mingxin, a doctoral candidate of the Department of Eco-civilization Research, University of Chinese Academy of Social Sciences; the eleventh chapter by Mao Xianqiang, Professor of Beijing Normal University School of Environment, Guo Zhi, a doctoral candidate and Gao Yubing, a research assistant; the twelfth chapter by Li Jinliang,

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president of Beijing Institute of Green Resources and professor-level senior engineer; the thirteenth chapter by Wang Mou, researcher of CASS Research Institute for Eco-civilization, Xin Yuan, senior engineer of China Meteorological Administration, Chen Ying, and Zhang Yongxiang. Moreover, Zhang Zhining, a doctoral candidate at the University of Chinese Academy of Social Sciences, and Li Mingyao, an undergraduate student, put in painstaking efforts for the proofreading of this book. Besides citing outcomes published by the authors themselves, this book is compiled with reference to relevant works, and the citations are stated in the notes. Your forgiveness will be appreciated if relevant citations are not made! Nevertheless, many errors may have crept into this book due to my limited competence. Criticism and suggestions from readers will be greatly appreciated! Zhuang Guiyang October 2021