China needs to unleash $6.5 billion in green investments and radically restructure its economy if the planet is to win the fight against climate change.
The warning came after COP26, where hopes that governments would commit to stronger decarbonisation targets were dropped by India and China downplayed its pledge to end coal-fired power.
And hours after the Glasgow summit closed on Sunday, environmentalists and economists questioned whether Beijing was committed to such fundamental changes.
“It is very difficult to break down this relationship between energy consumption and GDP growth,” said Neil Beveridge, senior analyst at Bernstein in Hong Kong.
The fight against global warming largely revolves around the efforts of a legion of policymakers in Beijing who are tasked with removing the world’s largest polluting coal.
China, factory of the world, which accounts for about 30% of global greenhouse gas emissions with fossil fuels, accounting for 85% of the country’s total energy.
“That’s the point. . . China is now attaching great importance to the decarbonization process. But it remains to be seen how much the government will have for the possible economic costs,” wrote Arthur Kroeber and Rosealea Yao, Beijing-based analysts from Gavekal Dragonomics, a consulting firm, in COP26. .
They added that China’s success will depend on “very strict restrictions on sectors critical to sustaining China’s economic growth over the past decade”.
According to Bernstein’s calculations, to achieve the 2060 carbon-neutral pledge made by President Xi Jinping, China faces a “major challenge”: $163 billion will be spent annually on renewable energy. generation and other decarbonization technologies.
That’s almost double the $91 billion invested in 2019 and up to $6.5 billion over four decades. However, Beveridge noted, the estimate could be conservative because it doesn’t include related spending on areas like grid upgrades.
Xi’s absent from Glasgow, coupled with Beijing’s decision not to significantly upgrade its commitments from the 2015 Paris accord, disappointed many, including Joe Biden, the US President.
While rare US-China Joint Statement Cooperation against climate change has marked the thaw in relationship between Beijing and Washington, was immediately criticized by environmental groups for their lack of concrete commitment to detailed plans.
Li Shuo, an energy expert with Beijing-based Greenpeace, said the US-China statement helped calm the mood in the COP hall but “pale in the face of the tough climate challenge” our”.
Turn the head of China Coal mining and coal mining cuts in recent months have drawn criticism from the country. Beijing’s turn to fossil fuels to tackle an energy shortage that has paralyzed factories across the country is a warning of how the Chinese government might respond to competitive interests. competition of economic growth and decarbonisation.
Priscilla Lu, who leads sustainable investments in Asia for DWS, the wealth management arm of Deutsche Bank, says China’s climate challenge will be compounded by massive urbanization. ahh. More than 100 million people are forecast to move from rural areas to cities in the next 10 years, adding enormous demand to the country’s strained energy system.
Two unanswered questions, experts say, are whether China’s lenders can attract an unparalleled and sustainable amount of cash for renewable energy, and how Beijing will manage it. the decline of the fossil fuel industry.
Despite the size of the challenge, Lu stressed that the “consistency of financing” led by Beijing’s state-backed oil and lending institutions towards renewable energy sectors is one of the most important. The most “meaningful” change is taking place.
“We should give China credit for its continued commitment [climate] goals and importantly by taking and actions have helped fund the large-scale deployments that have occurred in the solar and wind energy sectors over the past 7 to 10 years,” she said.
Helping this cause, the People’s Bank of China last week announced a long-awaited monetary base to support decarbonisation projects. The facility provides low-cost capital to financial institutions by providing loan assistance with an interest rate of 1.75%.
Increasing spending on renewables is only one part of the puzzle in reversing the country’s reliance on coal and getting Beijing to hit its target of peaking emissions by 2030. And analysts say know that the Chinese government has not explained how it will deal with legacy coal and gas companies, as well as their investors.
Boris Kan, senior credit officer at Moody’s, said: “Over the next 40 years, China’s power sector will face refinancing and asset stranding risks, higher emissions costs and returns from coal power declines, but those effects will be more significant in later years.”
For its part, China has come under pressure from the United States and other Western governments over its responsibility to respond to the climate crisis, frequently stressing its status as a developing country.
China’s environment ministry on Sunday said tackling climate change “should be done by all parties with varying degrees of responsibility”.
Despite the severe economic and financial challenges, some analysts believe that Xi’s path is predetermined. In the days leading up to COP26, the State Council, China’s cabinet, outlined a plan to reach peak greenhouse gas emissions by the end of the decade.
Yun Jiang, a China expert at the Australian National University, notes that the policy document also links China’s carbon policy to “national rejuvenation”, one of his favorite topics. Practice.
“It would be unthinkable for the Chinese people, including local officials, to go against a major strategic decision affecting the sustainability of the Chinese nation,” she said.