05:32 26.09.2020

Bloomberg New Economy: China’s Big Climate Change Paradox

Source: Bloomberg
Bloomberg New Economy: China’s Big Climate Change Paradox

When it comes to the environment, China is a paradox. On the one hand, it is a “wind, solar, and battery superpower,” as Cameron Hepburn of the University of Oxford put it, “with hydrogen now in its sights.” Yet at the same time, the country mines and burns half of the world’s coal.

These two titanic forces—one clean, one dirty—are at constant war in China’s fractious domestic economy, pitting entire provinces and whole industrial sectors against each other.

Right now, as China jumpstarts its economy after the Covid-19 lockdowns, the coal lobby has the upper hand. That’s what made the timing of President Xi Jinping’s United Nations pledge this week—to make China carbon neutral by 2060—so incongruous. One may recall the speech at Davos in 2017 when he presented China as the savior of globalization just as Beijing was doubling down on mercantilist policies with its “Made in China 2025” industrial plan.

Apart from the fact that China’s coal consumption is rising again after dipping for several years, and that its carbon emissions are commensurately higher than they were a year ago, Xi, 67, gave no details during his UN speech about how China will achieve its net zero ambitions four decades from now.

Geopolitics surely played into the dramatic UN announcement. Alarmed by Europe’s growing pushback on trade, technology and human rights, China may be anxious to make common cause with Europeans on climate. A united front with Germany, France, the U.K. and other European powers would have the added benefit of further isolating President Donald Trump, who is determined to pull the U.S. out of the Paris accords by November.

But energy analysts and quite a few climate activists are ready to see Xi’s speech as a real shift. At the very least, it signals a profound rethinking of how China sees its global responsibilities on carbon emissions. The days when it tried to catch a break on climate change by asserting its status as a developing country are over. (China may be the world’s biggest carbon emitter, but as Beijing used to remind the industrialized world, the U.S. has put far more carbon into the atmosphere since the Industrial Revolution.) 

China now joins more than 60 countries pledging carbon neutrality. It also matters that Xi got on this train as his government puts the final touches on the next five-year industrial plan, covering 2021-2025. Whether China’s new climate policies are to be implemented should thus become clearer in the near term.

One reason to think this is serious stems from internal pressure to decarbonize the world’s second largest economy. The Chinese party-state derives its legitimacy from delivering rapid growth, but increasingly the public is saying the priority should be clean air and water. For the Chinese Communist Party, green may be the new red.

Moreover, it should be clear to Beijing technocrats that there’s only so much steel floodgates and concrete seawalls can do to protect coastal manufacturing centers. Shanghai was built on swampland: absent decisive action on climate, large parts of it will go under.

As for geopolitics, this moment goes far beyond balance-of-power considerations involving the U.S. and Europe. China’s national security demands that it reduce dependence on imported oil by installing more green power. And Beijing has a good shot at turning its current vulnerability on energy into a towering strength, by leading the world on production of electric vehicles and other green technologies. 

But the challenges involved in a Chinese green transition are monumental.

“Think about it: The way we eat, the way we consume energy, the way we produce our food, the way we commute to work will need to be completely rearranged,” said Li Shuo, a policy adviser for Greenpeace China. Sanford C. Bernstein & Co. puts the price tag for this makeover at $5.5 trillion over the next few decades.

In the end, success or failure will come down largely to domestic political factors. Coal and renewables—and the bureaucratic power blocs that support them—are currently locked in a “battle royale,” said Jeffrey Ball, a scholar-in-residence at Stanford University. He adds: “It’s far from clear who wins that fight.”

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