Even before the Covid-19 crisis, China seemed to be at an inflection point in its energy policy, with fossil fuel consumption growing rapidly after plateauing during the latter half of the 2010s and a slowdown in the growth of renewable energy projects. As the country recovers, restrictions on the construction of new coal-fired power plants have been loosened, with more approvals in March 2020 than in the whole of 2019, and major new areas have opened for new coal mines. An influential power sector body, the China Electricity Council, has also called for the cap on coal-fired power generation capacity to be increased to 1300 gigawatts (GW) by 2030, which is 290GW higher than current levels. This risks stranded assets and lock-in to a higher carbon path.
At the same time, China’s draft energy law stresses the need to cut greenhouse gas emissions in its energy system, and scenarios consistent with Paris Agreement climate goals require major reductions in China’s coal-fired power generation. The law would establish guaranteed minimum levels of renewables in each province and give renewables priority access to the electricity grid. The government is also promoting ultra-high voltage (UHV) power transmission to take renewable electricity to where demand is greatest and reduce renewables “curtailment”, as part of its “neo-infrastructure” Covid-19 economic recovery package.
In the coming months, China has an opportunity to strengthen its targets for 2030 greenhouse gas reductions under the Paris Agreement as it develops its 14th Five Year Plan, setting its top-level energy and climate policy blueprint for 2021 to 2025. These are hugely important commitments that should be based on an integrated energy and climate policy framework, to put China on a long-term path to lower emissions.
A priority of the draft energy law is improving the regulation of energy exports and imports, including the management and import of “clean” and “advanced” energy technologies. But the bill falls short on exports, as there are no provisions for the screening of fossil fuel products or technologies. This means the bill does not address the “carbon leakage” resulting from China’s export and support of coal technologies and products.
China’s support for fossil fuel projects, such as coal power in countries that are part of the Belt and Road Initiative (BRI) has environmental and social impacts. Changes to the draft energy law are needed to introduce binding climate and export screening criteria for all Chinese exports of fossil fuel projects. This would align such projects with practices commonly accepted by the international community, including multilateral development banks of which China is a member.
The government has made some progress in this area. In 2017, four government regulatory bodies issued an advisory document, “Guidance on Promoting a Green Belt and Road”. This recognised the challenges faced by Chinese companies undertaking overseas infrastructure projects and called on them to adopt higher environmental and social standards.
This green roadmap would define the incentives and restrictions for all energy projects, including coal power, gas and oil extraction, and transportation across boundaries.
Transboundary energy projects include pipelines, transmission lines and associated facilities. Several projects have been built without meaningful transboundary assessments of their environmental and social impacts, including the Sino-Myanmar oil and gas pipelines, the Kazakh-China oil pipeline, and the Central Asia-China gas pipeline. There are no environmental and social management plans in place to mitigate their damage to ecosystems or restoration plans for the environment and communities affected.
The draft energy law recognises a need to scale up regulatory oversight, particularly by the National Energy Administration (NEA) and the State-owned Assets Supervision and Administration Commission of the State Council (SASAC). The bill is silent on the role of the Ministry of Ecology and Environment, which regulates climate and environment matters and is host to the “Green Belt and Road Initiative Centre”.
Solving the global climate crisis will need China in the driving seat. The energy bill shows that the government wants to increase control measures for both the import and export of energy technologies, even if the reference to clean energy is limited to imports for the time being. However, by focusing mostly on domestic energy policy, the draft energy law neglects the importance of tackling the carbon footprint that China is creating in BRI countries through its financing and construction of high-carbon infrastructure.
In the wake of the coronavirus, it is not inconceivable that the central government would seek to stimulate an economic recovery by relaxing environmental regulations and hesitating on costly measures to peak carbon emissions. As China and countries signed up to the BRI focus on repairing economies damaged by the pandemic, it may seem like wishful thinking to expect policy decisions to be compatible with the goals of the Paris Agreement.
The draft energy law touches on the export of energy and transboundary projects but doesn’t go far enough. If China is committed to greening the BRI then aspirations need to be turned into statutory requirements. The government must bring an end to investments in high-carbon energy projects and address the fragmented regulation of overseas projects. This should include drafting an outbound investment law and amending the environmental impact assessment law, which is currently limited to projects inside China.
Whatever happens, as the world’s largest carbon emitter today and enabler of so many new coal projects, China’s decisions will have impacts for generations to come.