Caixin
Aug 28, 2024 05:53 PM
OPINION

Commentary: The Strategic Imperative of China’s Green Transition

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Wind turbines in operation in Tongwei county, Northwest China’s Gansu province. Photo: VCG.
Wind turbines in operation in Tongwei county, Northwest China’s Gansu province. Photo: VCG.

As China approaches its goal of peaking carbon emissions before 2030, the push for clean energy and a green economy has become a strategic imperative. This transition is essential not only for achieving climate targets, but also for ensuring energy security and driving economic growth. The rapid expansion of the clean energy sector has elevated it to a crucial role in shaping China’s future, making it a central element of the country’s broader economic and energy strategy.

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  • China aims to peak carbon emissions before 2030 through a strategic push for clean energy and a green economy, evidenced by recent policies and the Third Plenary Session's inclusion of "carbon reduction."
  • The clean energy sector has become pivotal, contributing 40% of GDP growth in 2023 and driving significant shifts from coal to renewable sources like wind and solar power.
  • Despite progress, challenges include rising energy consumption, inflexibility in the power grid, and industrial pressures, necessitating deeper structural and market reforms for successful green transition.
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As China moves towards its goal of peaking carbon emissions before 2030, the push for clean energy and a green economy has become a strategic imperative. This transition is vital for achieving climate targets, ensuring energy security, and driving economic growth, positioning the clean energy sector as a central element in China's broader economic and energy strategy [para. 1].

### Policy commitment: Strategic Shift

In recent months, China has introduced a series of unprecedented policies aimed at accelerating its green transition and carbon emission reduction. Notably, the Third Plenary Session of the 20th Central Committee included "carbon reduction" for the first time in its communiqué, underscoring the new priority of sustainable development in government strategy [para. 3]. Following this, the State Council issued comprehensive guidelines for the green transition, including industry-specific action plans and a dual control system for carbon emissions. These initiatives demonstrate the government's heightened commitment to climate goals and its effort to fundamentally reshape the nation’s energy and economic priorities [para. 4].

### Green Transition: Economic and Energy Policy

China's green transition has become a core driver of its economic and energy policies. Historically, China has aimed to balance economic growth with environmental protection, but faced challenges during the pandemic when short-term economic gains were prioritized over environmental goals, leading to a surge in energy consumption and delays in achieving carbon intensity targets [para. 6]. In 2023, clean energy emerged as a key driver of GDP growth, compensating for the downturn in real estate and contributing approximately 40% of the year's economic expansion. This demonstrates that the green transition can be an engine for growth, with President Xi emphasizing its importance for "high-quality development" [para. 8].

### Energy Policy Adjustments

The rise of clean energy has also prompted adjustments in energy policy, shifting from a reliance on coal to an increased focus on renewable sources. Policies now signal a stronger commitment to expanding wind and solar power, beginning to reshape China’s energy mix and reduce coal's share in power generation [para. 9]. Despite challenges, this transition positions China to play a central role in global climate action [para. 10].

### Carbon Emissions Decline in Q2 2024

Recent figures show a tangible decrease in carbon emissions for the first time since the pandemic. In the second quarter of 2024, CO2 emissions dropped by 1%, primarily driven by a 3% reduction in the power sector due to the rapid expansion of clean energy capacity. Solar and wind power generation increased significantly, contributing to an 8 percentage point drop in coal-fired power by June 2024. If this trend continues, February 2024 could mark China's carbon emissions peak [para. 11][para. 12].

### Structural and Market Challenges

Despite these advances, China's energy consumption continues to grow rapidly, driven by energy-intensive industries. Energy consumption rose by 4.2% in the second quarter of 2024, with GDP growing by 4.7%, indicating a modest improvement in energy efficiency [para. 15]. The coal-to-chemicals industry, a major factor in this rise, increased its coal consumption by 21% in the first half of 2024 [para. 16]. Additionally, the inflexibility of the power grid hampers the efficient distribution and utilization of renewable energy, requiring urgent reforms [para. 18].

The steel industry, another significant source of carbon emissions, has been slow in adopting low-carbon technologies, hindered by overcapacity issues [para. 19]. Also, while the EV sector has seen record sales, it faces challenges from intense domestic competition and international trade barriers [para. 20].

### Conclusion

China's green transition is progressing rapidly, driven by clean energy development which is central to economic growth and achieving carbon reduction targets. However, challenges remain, including controlling coal consumption, improving grid flexibility, and adjusting industrial structures [para. 24]. To ensure success, China must deepen reforms, marketize policies, and accelerate technological innovation and structural optimization, solidifying its leadership in global climate governance [para. 25].

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What Happened When
2023:
Clean energy sector contributed approximately 40% of GDP growth.
First half of 2024:
Solar and wind power generation increased by 171 terawatt-hours.
Q2 2024:
China’s carbon dioxide emissions dropped by 1%, driven by a 3% reduction in the power sector.
By June 2024:
The share of coal-fired power dropped by 8 percentage points.
August 23, 2024:
China suspended permits for new steelmaking projects.
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