China’s prediction of achieving carbon peaking by 2030 and carbon neutrality by 2060 demonstrates not only its commitment but its determination to adopt a whole-society approach and translate such a commitment into concrete action in curbing carbon emission. In fact, the “dual-carbon” plan is fundamentally aligned with the country’s national interests.
China is making steady progress toward its carbon peak goal. At present, China’s industrial sector consumes 48.3 percent of the nation’s energy, of which the steel industry and chemical and petrochemical industry account for 24 percent and 21 percent, respectively, of energy consumed by the industrial sector. Although these industries are under great pressure and face challenges in reducing carbon emissions in the short term, there are two reasons to be optimistic about China’s capacity to achieve its carbon peak goal.
The first reason is the accelerated pace of carbon neutral transition in major industrial sectors, which include the steel industry. By 2021, China’s accumulated stock of steel in use sat close to 11.4 billion metric tons, or approximately 8.1 tons per capita. According to the experiences of developed countries, when the stock exceeds 8 tons per capita, the amount of end-of-life scrap increases considerably. According to the China Association of Metal Scrap Utilization (CAMU), China consumed 226.21 million tons of steel scrap in 2021, resulting in a reduction of about 360 million tons of carbon emissions compared to consuming iron ore simply to make steel. On the other hand, with the electric power industry thriving, the proportion of steel produced by electric arc furnaces is likely to continue to rise and even surpass converter steelmaking. As a result, China’s steel industry will significantly reduce its consumption of fossil fuels, and consequently its carbon emissions.
The second reason is the slowdown in China’s gasoline-fueled vehicle market. China’s vehicle ownership rate per 1,000 inhabitants stood at 225 as of November 2022. Most forecasts anticipated that the growth in the vehicle ownership rate would decelerate considerably once it exceeded 200. It is further forecast that when the ownership rate falls between 200 and 400, its growth rate will decline from 11-12 percent to 4-5 percent. It is likely that China’s vehicle ownership rate might follow this pattern, and might have already shifted into a phase of low and medium growth. In addition, according to forecasts, China’s new-energy vehicles market share might approach or even exceed 60 percent by 2025, and surpass 90 percent by 2030. This shift would reduce carbon emissions significantly.
China’s “dual-carbon” strategy is beneficial to its national security. China is expected to import a record amount of crude oil in 2023, mainly due to increased demand for fuel as people travel more following the lifting of COVID-19 restrictions. If China’s energy sector shifted from fossil energy to non-fossil energy, it would be able to reduce its dependence on foreign sources. In the long run, this could be seen as a crucial measure to protect China’s national security interests.
China’s photovoltaic industry currently ranks among the most prominent worldwide in terms of manufacturing size, technological advancement, market expansion, and the entire supply chain system enhancement after decades of development. With its global competitive advantages in end-to-end autonomy, the photovoltaic industry in China may take the lead in establishing the benchmark for high-quality development. In fact, the photovoltaic industry has become a significant engine to promote China’s energy transition.
How to plan ahead and seize the opportunity during the transition to a low-carbon economy is a question that every nation and every enterprise should consider carefully
China expects to raise the share of non-fossil fuels in its total energy mix to 18.3 percent in 2023, as part of its energy transition push. According to the 14th Five-Year Plan for Renewable Energy, 25 percent of China’s energy will be derived from non-fossil sources by 2030. In addition, 80 percent of the country’s energy mix will come from non-fossil fuel sources by 2060.
Optimism regarding the future expansion of renewable energy mainly stems from the fact that the cost of wind and photovoltaic power generation has fallen significantly over the past few years. The International Renewable Energy Agency, which is based in Abu Dhabi, reported that new renewable capacity added in 2021 might lower the cost of generating electricity in 2022 by at least $55 billion. The period 2010-2021 saw a seismic improvement in the competitiveness of renewable energy — the global weighted average levelized cost of electricity of newly commissioned utility-scale solar PV projects declined by 88 percent, while that of onshore wind, concentrating solar power, and offshore wind fell by 68 percent, 68 percent, and 60 percent, respectively. In China, the cost of photovoltaic power generation has fallen to 0.3 yuan/kwh, and is expected to fall to below 0.25 yuan/kwh during the 14th Five-Year Plan period, which would be lower than the cost of coal-fired power generation.
Additional confidence comes from the enormous potential of renewable energy exploration. Taking photovoltaic energy as an example, if factors such as peak-to-valley matching and power losses (transmission and distribution) on electrical grids are not considered, as little as 1-2 percent of western China’s land area installed with solar panels would support the majority of China’s primary energy consumption under the “dual-carbon” target.
It is inevitable that the future development of renewable energy still faces numerous challenges. Photovoltaic and wind power generation rely heavily on natural resources. Variations in light magnitude and wind strength may cause fluctuations in electricity generation. The cost of regulating and balancing the electricity generated by renewable energy is significantly higher than that of traditional energy sources such as thermal power. This includes the use of other auxiliary methods or novel energy storage to regulate frequency and peak, as well as the upgrade and intelligent transformation of grid systems.
Energy storage has the potential to become a significant technological breakthrough in the future since it might be able to solve the mismatching problem between the development of renewable energy and capacity to consume it in order to prevent the large-scale abandonment of renewable energy. Moreover, energy storage could flatten the power curve, thereby reducing the strain on the grid and the cost of upgrading.
In addition to the progressive development of renewable energy technologies, the fastest and most practical way to achieve carbon reduction is by scaling up global carbon pricing through measures such as carbon taxes and carbon trading. Due to the pervasiveness of carbon emissions, the cost increase will impact all facets of society, not just manufacturing or new energy sectors.
The global climate crisis has triggered a revolution in carbon neutrality and renewable energy that is equally significant and consequential as the information technology revolution we have been experiencing for decades. How to plan ahead and seize the opportunity during the transition to a low-carbon economy is a question that every nation and every enterprise should consider carefully.
The author is strategist, Sustainability Strategy, Economics & Strategic Planning Department, Bank of China (Hong Kong) Ltd.
The views do not necessarily reflect those of China Daily.
