Conclusion: The path forward
The key to China fulfilling its own climate ambitions is to reduce the tension between short-term economic interests and medium- to long-term economic interests. The current nature of China’s economy, including its industry- and emissions-intensive structure, means that this tension will likely persist throughout the coming decade, and potentially toward 2060. But China’s leaders also recognize that, in the long term, China’s development will not be economically sustainable – and hence politically and socially sustainable – until it is also environmentally so.
Hence, the next four decades will likely be marked by a constant balancing act between economic transformation and the preservation of entrenched interests – a transformation strengthened by genuine, politically paramount climate ambitions, just as it is simultaneously weakened by bureaucratic failings and structural disincentives to change.
Technologically, China has all it needs to create a green economy – and the capability to support future growth through R&D. And by Beijing’s own assessments, the green transition is economically feasible within the dual carbon target timeline – so long as it is not executed so swiftly that it triggers major industrial or labor disruptions. Indeed, China’s dual carbon targets have been carefully selected to reflect what the Party leadership views as the most aggressive target that is achievable – within a tolerable range of economic costs (the variable with which many climate-minded foreign observers have scruples).
The central holdup, then, is the extreme economic risk aversion exhibited by China’s central economic authorities. Because these authorities hold pivotal influence over the shape of national policymaking, their risk aversion trickles down and tends to skew the overall incentives and priorities of the rest of the bureaucracy toward short-term economic interests. Where these authorities are not risk averse – e.g., in the move from traditional internal combustion engine to battery electric vehicles – industry thrives. But the set of such examples still remains, for now, much smaller than that needed for China’s true green economic transformation.
In forecasting the decade ahead, the pivotal question is whether the tide will change after 2022 – truly a pivotal year for China’s balancing act. This year has already seen China’s hangover from the fall 2021 power crisis, Ukraine, and the domestic resurgence of COVID. And, just as importantly, the 20th Party Congress will be held in mid-October of this year: Xi remains incredibly wary of inhibiting the economy until the event has successfully ended with his legitimacy untarnished.
Whether 2023 marks a turning point for China to go greener will depend largely on Beijing’s level of economic stress. The question is not whether China will grow more slowly through 2030 than it has over the past decade – it certainly will. Gone are the years of more than six percent GDP growth, as Beijing well knows; indeed, as of late July, it had even finally given up on its 5.5 percent GDP target for 2022.46 Instead, progress in 2023 will depend on whether the policymaking elite in Beijing feel comfortable investing in long-term upgrades instead of pulling every string possible to squeeze short-term growth out of the economy, or overprioritizing coal-based energy security, at the price of maximizing emissions.
Coal, of course, remains central to the story. Notably, in the shadow of the fall 2021 power fiasco, Beijing increased its new coal production capacity target to 300 million tons for 2022. Throughout the second quarter of 2021, Premier Li Keqiang warned officials to head off potential power shortages by ramping up coal supplies and production capacity in a wave of crisis messaging – and stockpiles and consumption grew. Despite a streak of historic heat waves and drought, as well as related power rationing in a few provinces, such as Sichuan, summer 2022 largely avoided the broad, coal-driven power cuts seen in 2021 – and that fact itself will help reinforce the notion that coal is the core of energy security.
The long-term situation is not hopeless, however. Local policymaking – at both the provincial and municipal levels – still far exceeds the level of ambition of the national carbon targets. While local plans are more likely to fail, they reflect a structural interest in ambition to create new economic opportunities, in stark contrast with the central government’s structural incentive for risk aversion in its target setting.
In particular, numerous localities have made remarkably bold efforts to support energy storage, which will enable renewable energy to take on a progressively greater role in stabilizing the grid – which coal does today. Already, many provinces are laying the foundation for a functioning energy storage market that could help make storage profitable, enabling its further expansion and lessening regional dependence on coal by the mid-2020s.
And even at the national level, the dual carbon targets remain among China’s most important high-level priorities. Indeed, the staggering success of China’s new energy vehicle (NEV) industry makes clear that economic and carbon goals can align, with remarkably positive results – a lesson that Beijing has studied closely, even if it has not found precise analogs to overcome the challenges of decarbonizing GDP staples like steelmaking, refining, and mineral processing.
To that point: Beijing famously poured subsidies into the development of the NEV and battery industries – by some counts, as much as RMB 676 billion between 2009 and 2019.47 While subsidies enabled the industry’s development, however, they alone did not guarantee success. What made Chinese firms industry leaders – notably CATL, now the world leader in battery technology, supplying domestic and foreign brands alike, including Tesla – was the ingenuity of local officials in promoting market opportunities aligned with both economic and environmental goals.
This is where, again, the power of local policymaking becomes so critical to forecasting the decade ahead – and where the structural incentives for increased local ambition, even in spite of long-standing entrenched interests – suggest brighter prospects for China’s long-term success.
Ultimately, then, China’s path forward depends on both the top and the bottom of the governance system, namely:
- Beijing’s ability to expand the overlap between economic and climate goals, rather than entrenching tension between them
- The ability of policy innovators to fill the gaps in Beijing’s high-level decarbonization roadmap with new, green technical solution, financial products, and the like – particularly at local levels, as the model of bottom-up experimentation to enable large-scale innovation remains strong
So long as China’s long-term climate plans remain resilient, there is hope that China will live up to its ambitions. In particular, every indication suggests that carbon neutrality by 2060 is in the cards. But so long as short-term economic demands dominate efforts to make incremental progress toward China’s long-term climate goals – i.e., inhibiting the two abilities noted earlier – the prospect of the orderly, nondisruptive decarbonization process that Xi envisions remains in doubt.
From today’s vantage point, China appears to be teetering on the edge of the path toward peaking emissions before 2030. But success in this decade is about more than simply meeting the 2030 target. True success will be achieving that goal in a manner that doesn’t cause the pendulum to swing back just as hard afterward, with economic interests in the 2030s holding back further climate transformation because of the traumas of the late 2020s and their aftermath.
China’s dual carbon targets remain within reach, but how Beijing handles 2023 – after it has an even tighter handle on recent macroeconomic shocks and, in particular, after the 20th Party Congress and the associated political fanfare – will be the most important near-term signal of whether it can succeed in the pursuit of its green, low-carbon transformation in the decades ahead.