China will open its energy sector wider to foreign investment as part of its plan to ensure security and prioritise the development of renewables, according to a new government white paper, although “efficient” use of fossil fuels will continue.
Investment restrictions will be lifted on coal, oil, gas, power generation – except nuclear – and new energy businesses during the 14th five-year plan period between 2021-25, said Zhang Jianhua, head of the National Energy Administration, on Monday.
At the same time, the government will continue to phase out subsidies for clean energy like solar and wind power due to rapidly declining costs and let the market play a more decisive role, he said after the release of the white paper.
China, the world’s largest energy consumer and emitter of greenhouse gases, has pledged to transition away from fossil fuels over the next four decades, but energy security and economic growth remain key concerns for the government.
Balancing efforts to decarbonise the economy and maintain steady economic expansion have been complicated by China’s growing rivalry with the United States and the lingering impact of the coronavirus pandemic.
One particular challenge for Beijing will be reducing the nation’s dependence on coal, the country’s largest energy source.
Coal-fired power generation accounted for 57.7 per cent of the country’s total energy consumption in 2019, a decline of 10.8 percentage points from 2012, but still far higher than cleaner energy sources – including natural gas, hydro, nuclear, solar and wind – which together grew by 8.9 percentage points to 23.4 per cent, according to the white paper titled “Energy in China’s New Era”. Oil makes up the remaining 19 per cent.
In September, President Xi Jinping surprised the world with an announcement that China aimed to be carbon neutral by 2060 and reach peak carbon emissions before 2030.
The commitment, which was light on detail, will require huge investment in renewable energy, electric cars and technology like carbon capture and storage.
China will need to spend up to 130 trillion yuan (US$19.8 trillion) to hit the net zero goal, Ding Zhimin, the former deputy director of the Policy & Law Department of the National Energy Administration, told the International Energy Executive Forum 2021 earlier this month.
It will also need to slash the share of coal in the energy mix to less than 5 per cent and raise new energy sources to more than 85 per cent, she said.
The government white paper said China would continue to develop solar energy, wind power, green hydropower and nuclear power, as well as biomass, geothermal and ocean energy. But it would also continue to support “green mining” of coal and boost domestic exploration for oil and gas.
Earlier this month, Xi pledged to increase the country’s installed capacity of wind and solar power to more than 1,200 gigawatts by 2030 and pump up the share of non-fossil fuels in primary energy consumption to around 25 per cent in the same time frame. Currently about 15 per cent of energy is drawn from non-fossil fuels, including nuclear power.
While the share of non-fossil fuel energy was expected to climb to 15.8 per cent by the end of this year, Zhang admitted it would be difficult to hit Xi’s target.
“There is a lot of pressure to increase the share of non-fossil fuel energy to 25 per cent by 2030,” Zhang said.
China’s top policymakers have made it clear that adjusting energy consumption away from coal, the dirtiest fossil fuel, to power sources with lower emissions is one of the eight economic priorities for next year.
The country will formulate an action plan to reach peak emissions ahead of 2030, according to a statement released last Friday after the annual Central Economic Work Conference, which set economic policy priorities for 2021.
Already, to incentivise local governments to meet the emissions targets, Beijing has made action on reducing carbon intensity a part of the political evaluation of government officials at different levels, thereby tying achievement of the targets to their political advancement through the ranks of the Communist Party.
The central government is also expected to make the carbon intensity indicator a compulsory requirement in the 14th five-year plan, according to Zhao.
Beijing’s efforts to tackle climate change might be one of the few areas it can find room to cooperate with Washington following the election of Joe Biden.
The president-elect has made climate change a top priority and promised to break from the environmental policies of the Trump administration, including re-entering the Paris climate agreement.
On Saturday, Biden introduced key members of his climate change team, including former presidential candidate and secretary of state John Kerry as the new US global climate envoy, who will sit on the National Security Council.
China and the US reached a major climate change agreement during the Obama administration in 2014, which was later abandoned by US President Donald Trump.
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