China’s Energy and Climate Balancing Act

China has adopted a relatively low profile of late when it comes to addressing climate change. At the COP 26 climate conference in Glasgow, Scotland, the most notable headline concerning China may in fact have been the failure of its president, Xi Jinping, to attend or address the conference directly. The Chinese leader’s absence was remarkable given the country’s position as the top global emitter of greenhouse gasses, and also in light of the leadership role that China has taken at other global climate conferences over the past few years.

Scott Moore, Director of China Programs and Strategic Initiatives at the University of Pennsylvania, looks at factors that have contributed to China’s recent avoidance of the climate spotlight, including an ongoing energy crisis that threatens the nation’s economic growth. He discusses the political vulnerabilities that the pursuit of a low carbon energy system presents for China’s governing powers, how these considerations may shape the country’s future climate action, and the pace of its energy transition.

Full Transcript

Andy Stone: Welcome to the Energy Policy Now podcast from the Kleinman Center for Energy Policy at the University of Pennsylvania. I’m Andy Stone. China has recently adopted a relatively low profile when it comes to addressing climate change. At the COP26 climate conference in Glasgow, Scotland, the most notable news related to China may, in fact, have been the failure of its president, Xi Jinping to attend or address the conference directly. The Chinese leader’s absence was remarkable, given the country’s position as the top global emitter of greenhouse gases and also in light of the leadership role that China has taken at other global climate conferences over the past few years.

On today’s podcast, we’ll look at some of the factors that have contributed to China’s recent avoidance of the climate spotlight, including energy and real estate crises that pose a threat to the nation’s economic health. More broadly, we’ll examine the political vulnerabilities that the pursuit of a low-carbon energy system presents for China’s governing powers and how these considerations may shape the country’s future climate action and the pace of its energy transition.

Here to talk about China’s energy and climate policies is my guest, Scott Moore. Scott is a political scientist and Director of China Programs and Strategic Initiatives at the University of Pennsylvania. Scott, welcome back to the podcast.

Scott Moore: Thanks so much for having me, Andy.

Stone: I want to start out by stating something that’s obvious but nonetheless really merits highlighting for the context of our conversation today. That’s the fact that when it comes to energy, China really is a country of superlatives. It is the world leader in the build-out of clean energy infrastructure. It’s the dominant player in the global solar supply chain. It’s the leader in the production of electric vehicles. On the flip side, it’s also by far the world’s largest consumer of coal, the largest builder of new coal fired power plants and far and away the largest emitter of greenhouse gases. So my question to get us started is: How is it that China has become so absolutely prominent in just about everything that has to do with energy?

Moore: Absolutely, Andy. It’s a reflection, I think, of several things. First of all, of course, China is the most populous nation on the planet. To some degree, you’re just seeing a concentration of emissions on the basis of a fast-growing economy that is also a very populous economy. Speaking of the economy, China is also the second-largest economy. Third and most important, though, China is really the center of the world’s industrial economy. China is really the hub of global manufacturing and the production of physical goods. It’s also the largest producer and most important country when it comes to most of the world’s emissions-intensive and energy-intensive sectors — things like steel manufacture or concrete manufacture. Those are processes and industries that use a lot of energy and generate a lot of greenhouse gas emissions. And China really stands at the center of all that.

One related factor that’s just worth emphasizing finally is China’s really critical role in global trade as the world’s largest exporter. So not only is it making all of these things and playing a leading role in all of these energy and emissions-intensive sectors, but it really also stands in a lot of ways at the center of the world’s economy and trade. For all of those reasons, China is really the single most critical actor when it comes to energy use, the energy transition, and to global greenhouse gas emissions.

Stone: So China’s manufacturing economy is very important to it, and obviously is a backbone of the global economy, as well. So important.

As has been well-covered in the press, China did not introduce new or more aggressive climate targets at COP26 which is actually going to end this week. I shouldn’t say that completely in the past tense. Today is Thursday, November 11th. I wonder if you could contrast China’s involvement this year, at this year’s COP, with recent years when China did appear to be positioning itself more actively in the role of climate leader, particularly I would say during the Trump years and also dramatically at the Paris COP six years ago.

Moore: Sure. I do think it’s important to acknowledge up front that China has done a couple of really significant and important things when it comes to climate change. There are several things that one could point to, but I think the two biggest and most recent have to be the commitment that China’s top leader, Xi Jinping, made a little over a year ago at the U.N. General Assembly to decarbonize China’s economy, so to achieve net zero carbon dioxide emissions by 2060. That pledge or commitment was later clarified to include all greenhouse gas emissions, not just carbon dioxide. And that was really significant because it was the first time that China had pledged to definitively cut its greenhouse gas emissions. Before that, China’s commitments had all been related to peaking its emissions or sort of bending the curve on its emissions, if you will, rather than reducing them in absolute terms.

The second thing that’s really significant that China has committed to doing is to end financing and support for the construction of coal fired power plants outside China. The direct emissions impact of that — and that was something that Xi Jinping just announced this past September, just a couple of months ago, also at the U.N. General Assembly. Direct emissions impact — that announcement was less significant than the decarbonization or 2060 pledge issued the year before, but it was pretty significant because what we’re seeing increasingly is China’s environmental footprint being lessened within China, while being intensified abroad. So it was sort of a recognition that in order to really contribute to global sustainable development, China would have to reconsider its environmental footprint beyond its borders, as well. And so I think the coal announcement was very significant in that respect.

All of that being said, these are two big headline commitments. Below the surface, though, you’re absolutely right to say there’s been a lot of a mix, I would say, of disappointment and skepticism and head-scratching about some other seemingly less ambitious policies and commitments that China has put forward that don’t necessarily seem to align with the ambition of those two headline commitments.

One example is the 14th Five-Year Plan Targets for Climate and Energy that China released last year, which are in some ways less ambitious than one might expect and certainly that one might hope for, looking towards that 2060 net zero greenhouse gas emissions commitment. Also, as you pointed out, Xi Jinping did not make the choice to travel to Glasgow, and seemingly that was a sign or signal that he would be less personally involved in China’s stance and positions during the Glasgow climate talks.

Stone: You talked a lot about what China has done in recent years. I also want to point out that China actually has made moves to close quite a few coal mines. It has obviously got severe domestic air pollution problems, and it has tried to move away from coal. So it has taken domestic action.

Moore: It has. I think you do have to step back. As is so often the case, there are two ways — it’s sort of a glass-half-full or half-empty split screen that you can take, depending on your point of view. One thing that I often think is important to reflect on or one way to think about it is that China’s commitments on climate change have arguably been the most ambitious undertaken by any developing economy, that is to say an economy that’s still very much in a growth and development stage, still has a lot of significant development challenges, extreme poverty, et cetera. And yet those commitments and those ambitions don’t quite match the reality of where we stand, in terms of the urgency of reducing emissions very, very quickly.

So on one hand, these are pretty ambitious commitments, especially in relation to what other developing economies have said that they will do. On the other hand, it’s still probably not enough to really avert dangerous climate change. And beyond that, there are a lot of uncertainties around how fully and quickly these commitments can be implemented on the ground throughout China.

Stone: Let’s take this opportunity now to go into the current situation that has played out over the last month. COP 26, Glasgow is scheduled. It happens. Leading up to this, China enters an energy crisis, where there is a shortage of electricity. Electricity has to be cut off, at least partially, to some industries to make sure there is enough electricity, as I understand, for residential use. There’s also the background of the Evergrande real estate crisis, which can’t make things easier. All this happens as COP26 approaches. And China looks like it has its hands tied going into this. Is that right?

Moore: Yes, I think that is right, Andy. And I think just to add a couple of words of detail to that, China does face some significant macroeconomic headwinds, and it’s everything from continued pressures coming out of the pandemic, in terms of recovering as an export-led economy and also boosting the share of consumption in its economy. That’s sort of a long-term development challenge for China to continue to grow. It’s going to have to increase the share of domestic consumption versus reliance on exports and foreign investment. You’ve also got slowing population growth, which is creating some demographic headwinds. You’re starting to get some labor shortages in key parts of the economy. There are lots of macroeconomic headwinds that China faces, and that does make both the economics and the politics of pursuing an aggressive greenhouse gas mitigation policy for China difficult. 

We often tend to automatically assume that China is an authoritarian country, Xi Jinping is an incredibly powerful leader, so what he says goes. That’s true to a sort of very rough approximation, but even Xi Jinping can’t just will China to fully transform its economy. In fact, one thing that we see politically is that there is a faction within the Chinese party and bureaucratic apparatus that does think that China is moving too far too fast on its decarbonization and climate strategies, at the cost of poverty reduction, of jobs, of economic growth. You do see this contest playing out, and even Xi Jinping has to be sensitive to that.

Then I think the energy supply disruptions that you’re seeing are one manifestation of how difficult it’s going to be politically, as well as how economically costly and disruptive this transition is going to be. That doesn’t mean it’s not going to happen, but it does mean that it’s not going to be an easy lift. And just as a final point, I would add in that respect China’s situation does have a lot of similarities to the case of the U.S. and some other large economies where there remain some significant political and economic challenges to really decarbonizing the economy.

Stone: I just wanted to say something about that here. We talk about China going into COP in a difficult situation. The United States and Joe Biden went to COP, and he didn’t have Congressional buy-in, and he still doesn’t have that buy-in for the reconciliation package that would have most of the climate-related components to it. So China’s situation is not unfamiliar generally, it sounds like.

Moore: Yes, I think that’s absolutely right. And I think Chinese leaders and officials, and Biden and their Biden administration counterparts would actually recognize, I think, if they were able to sit down and have a fulsome, frank discussion about the challenges that they face in implementing their climate policies, I think they would actually recognize a lot of the same challenges across countries. And that’s probably the moment to also acknowledge — and certainly we have to make sure that we address this — we’re speaking on Thursday. Less than 24 hours ago came a surprise announcement that the U.S. and China had issued a joint declaration during the Glasgow climate talks, really pledging to continue to work together on climate change, to ensure that the world moves faster and with greater ambition to cut emissions.

So that is a significant symbolic move, and there were one or two practically significant things in there. Most of it restated previous commitments or gave a nod to previous commitments or announcements. But there was one thing in particular I just wanted to highlight, which is a commitment to end the illegal import of timber and potentially wildlife products or other things that contribute to illegal deforestation. That is actually a significant driver of global deforestation, and this is really centered on China — illegal imports into China. It’s a significant driver of global deforestation, which is in turn a significant source of greenhouse gas emissions, but that would also be, if fully implemented, a really good thing for the world’s biodiversity, which we should also acknowledge, even as we’re focused on cutting emissions, is really in crisis.

That’s, I think, a good thing to celebrate, that even though there are a lot of reasons to be skeptical and cautious about China’s climate policy, this announcement and that vision to end imports of illegal lumber in particular is worthy of some celebration.

Stone: The lumber component is promising. I think there’d be a lot of discussion and disagreement over how substantive the rest of the recent announcement is. But what does really stand out to me is it’s almost a replaying of Paris 2015, where at the last moment, the Chinese and the Americans got together to cut the deal that resulted in being the Paris Climate Agreement. We see a similar kind of dynamic here six years later, and I guess it really kind of shows that these two countries really do see the importance, at least symbolically, of them trying to move the ball forward on addressing climate.

Moore: That’s right, Andy, and I think you’re right that in large part, this declaration is symbolic. There wasn’t a whole lot new that would directly impact global emissions, with the exception as I mentioned, of this deforestation commitment and one or two other things. But you’re right. It was primarily symbolic. I don’t want to totally minimize the potential importance of symbolism, and certainly when you’re talking about global climate negotiations, it really is fundamentally about diplomacy, about messaging, about strategy and prioritization. And in that context, words do have power. It’s not trivial. On the other hand, it’s not something that’s going to itself really bend the curve on global emissions.

I’ll also just point out that I think that dynamic that you highlighted where there is some kind of furious, last-minute, largely U.S./China jockeying or horse-trading or negotiation. That is something that has really typified international climate negotiations, at least since 2009 Copenhagen, which really in many ways fell apart because the U.S. and China, and to a degree also, the E.U. just couldn’t reach agreement. So you do tend to see this dynamic playing out, and I think it’s significant that the U.S./China dimension or relationship remains so important to these negotiations, despite all of the deterioration that you’ve seen in U.S./China relations more generally since that time, since the 2009 talks.

Stone: You know, Scott, you are so steeped on the political situation in China. I want to bring up a couple of things that you mentioned earlier, and I think it ultimately ties into the question of political risk to the Communist leadership that could potentially arise if the country moves too quickly or not carefully enough to decarbonize. The point here again is what you brought up earlier, that China is a manufacturing-based economy. I think the government is trying to switch things over to services, but it’s still very much manufacturing-based. It’s the world’s backbone manufacturer. And inherent in that manufacturing is abundant use of fossil fuels.

So anything that would cut into that use or limit that use or discourage that use of fossil fuels is, in a sense, at least with the current make-up of industry and the current technologies that we’re using to run industry, is almost an attack potentially on the integrity of those industries. Maybe I’m being a little dramatic, but it seems like that to me. So can you tell us a little bit more about the political balancing act that the government has to take in terms of pushing forward on climate?  Obviously it’s doing very well in the business side of things, in terms of manufacturing renewable technologies, promoting electric vehicles. But when we’re looking at other heavy industries, tell us more about the Catch-22 that maybe the government finds itself in at times, as it tries to move forward on climate and preserve and grow these industries that are so essential to its economic growth, and I would imagine to domestic social peace.

Moore: Yes, that’s absolutely right, Andy, with emphasis on your point about the current make-up of the economy. And that’s critical because the other side to this story, and really what explains a lot of why China has made these relatively ambitious commitments again in a developing economy context is that China’s leaders really do believe, and I think with pretty good reason, that clean technologies are an important driver of future economic growth — renewables, as you mentioned, electric vehicles, et cetera.

On a related but also important point, I mentioned that one of China’s macroeconomic priorities, something that they really have to do to keep growing, to provide jobs and good incomes for their people is to shift from a very manufacturing, export-led, highly resource-intensive, highly polluting economic model to something that looks more like the U.S. or other advanced industrial economies, which is a much heavier proportion of services in the economy, higher value-added industries, less pollution and resource-intensive, more knowledge and sort of intellectual property and human capital-intensive fields. And if you think about it, that dovetails largely with the idea of decarbonizing the economy. You’re moving from older, dirtier, more traditional heavy industries toward these more services-intensive sectors.

And there’s one final point that’s worth emphasizing, and that’s more from a governance and political perspective. As China’s economy has developed, as it has created the world’s largest middle class, people with disposable income, there is more priority placed on public goods and social services, things like education, healthcare, and environmental quality — clean air, clean water, parks. And you see the government and China’s party and the state really trying to respond to that and provide those quality of life factors and public goods that people care a lot about. Again, that dovetails, generally speaking, with the idea of reducing emissions and mounting some kind of energy transition.

Now a last point, kind of coming back to the premise of your question, it’s a lot easier said than done. And in the short term, there are a lot of hurdles to doing that effectively, not least the continued relatively high cost of renewables and some lingering technical challenges that make it pretty difficult to fully displace coal. Whatever its drawbacks, coal remains cheap and plentiful in China.

Stone: So Scott, that brings up a related question. What are the barriers to actually implementing progressive energy policies at this point within China — beyond what’s already been done?

Moore: Yes, one thing that is really important to keep in mind when it comes to China, and again I think people tend to assume that China is a pretty centralized country. But in fact, it’s actually very decentralized in a lot of ways. Provincial, municipal, and local governments have a lot of power, and in particular a lot of flexibility to determine how centrally-defined policies are implemented. That carries a lot of advantages. It means that you don’t necessarily have to do things the same way in Shenzhen as you do in Beijing. But it also creates the potential for officials at these local levels to not follow through on their commitments to enact policies in ways that have perverse incentives.

Just to give one example, there is some evidence I came across recently that local officials are trying to ramp up their emissions, at least in some places, as high as possible ahead of 2030, which is when China has said it will peak its emissions. So if you think about it, that’s actually a pretty shrewd and rational approach. You want to get as high a ceiling for your emissions as you can, because it will be that much easier to cut emissions when you eventually have to do so.

Stone: It’s like, “Get your emissions in today, while you still can.”

Moore: Bingo, that’s exactly right. And that is perfectly rational and very shrewd — also exactly the wrong thing to do for the planet. So that’s, I think, a good, sharp example of how these dynamics and decentralization can be problematic when it comes to China and climate change.

The other thing I’ll just mention briefly is part of their decentralization is a reflection of the fact that there are huge disparities in terms of income and levels of development across Chinese regions. If you go to the big cities, Beijing, Shanghai, Shenzhen, frankly the difference between those places and the U.S. or other industrial economies is almost negligible at this point. But if you go to the parts of the interior, to the west, to rural areas, there is a massive discrepancy in terms of income, levels of development, capacity to adopt clean technology. And the decentralization policies that China has enacted really recognize that. So they have expectations that the Beijings and Shanghais are going to sharply reduce emissions, but there is potential for some of the poorer regions to actually continue to increase their emissions, at least heading toward the middle of the century.

Stone: I’m just curious, do you have in China something akin to the red state/blue state divide in the United States, both in terms of support for some of these policies, as well as I would imagine in some areas that may be more dependent on fossil fuels — does industry — and I don’t really understand how this works in China. Does industry have the ability to either promote or oppose forcefully some of these policies as we’ve seen often happen in the West?

Moore: Well, I think short answer, yes. One thing that I’ve said before, and I think I would stand by is that I think the governor or provincial party secretary — those are often the two most important leaders in a place like Shanxi province, which is known as China’s main coal producing province — would have a lot to talk about with the governor of West Virginia or with Senator Joe Manchin. I think they would see a lot of climate and energy issues much the same way, just because they share a lot of similarities in terms of being major coal-producing regions, having in some ways — I don’t want to overstate it — but in some ways similar cultural outlooks, socioeconomic profiles, et cetera.

However, I think there’s one big difference, which is China’s state and party apparatus does have a lot of fire power and coercive capabilities that are lacking in a system like the U.S. And so companies, particularly, have more power to slow down or water down reforms, not a lot of power to actually stop them. So at this point, there’s really no prospect, at least in the short-term, of China ending or unwinding the commitments that Xi Jinping has personally made on climate change. But where there is a lot of uncertainty is around, particularly at the local level, how much and how quickly these commitments will be reflected in changes on the ground.

Stone: One last time, I want to return to this issue of China being very much a manufacturing economy, very much dependent on heavy industry. These industries not only are major energy consumers, but they are also some of the most difficult-to-abate industries, in terms of their carbon emissions. Energy is used. Coal is used in production of steel, et cetera. Does China have a plan to address these industries, which again are so central to its economy?

Moore: Yes and no. Yes, in the sense that there are policies. I think EV support is part of this. There’s quite a bit of effort being put into decarbonizing the transport sector through the potential use of hydrogen fuels, biofuels, just more efficient electric vehicles. But it’s a technical challenge that remains for really the world at large. At the moment, we don’t really have good enough batteries to fully replace the internal combustion engine and hydrocarbon fuels, particularly for heavier vehicles, for medium heavy-duty trucks, large equipment, and very particularly for the aviation and marine sectors.

Probably we will get there through a combination of batteries, renewable power, biofuels, and conceivably even miniaturized nuclear reactors. But at the moment, we’re not there, and it’s not exactly clear how we will get from where we are today to there.

Stone: Let me ask you a couple more questions here to finish up. One is — this is something that has been bandied about quite a lot. I just wanted to ask: Diplomatic tensions between the U.S. and China have increased in recent years over Taiwan and other issues. I think tensions have also increased somewhat with Europe. To what extent might sour diplomatic ties with the U.S. and other countries play a part in China’s — or have played a part in China’s decision to play a smaller role at the most recent COP, and will it have any impact going forward?

Moore: You know, it’s a good question, and one that I can really only give a hopefully somewhat educated guess on. I’m not sure it plays a huge role. I think it’s worth underscoring that although tensions have risen between China and a range of countries, not just the United States, when it comes to Taiwan, that is primarily an issue when it comes to U.S./China relations, to a lesser degree China and Japan relations. And to an even lesser degree, relations with other countries.

But it’s sort of chiefly an issue in U.S./China relations. So I think Xi’s decision not to come to Glasgow probably isn’t so much a reflection of those issues. I would read it more as in line with what I have been hearing from a lot of Chinese interlocutors in Track 2-type discussions, which is that China really wants its existing climate and energy commitments to stand on their own. It doesn’t intend to use Glasgow as a flashy photo opportunity but really wants its existing commitments to speak for its commitment on climate.

There may also be some domestic politics and economic considerations behind Xi’s decision. I think the energy supply disruptions and the amount of grumbling that that’s caused among China’s commercial class shouldn’t be understated. So perhaps Xi simply didn’t want to be seen seemingly pushing climate issues at the expense of more immediate economic ones. And I suppose it is possible that he wanted to avoid potentially being embroiled in wider political disputes with the U.S. and with the E.U. But I would probably put those last, just because the U.S. and the E.U. have tended to insulate at least high-level climate discussions from these broader tensions.

Stone: A final question for you: Given the challenges that we see moving forward and China’s recent decision to increase coal production — we really haven’t even spoken much about the electricity crisis, but China is increasing coal production. It has allowed the price of electricity to go up, as well, so that generators can profitably produce electricity with coal, so that there is enough electricity in the country. But given that short-term trend that we’re going to see, increased coal fired power production, is it realistic that China will peak its carbon emissions before the year 2030? And what’s your view on China’s ability to go carbon neutral by 2060 because again, so much of the economy is tied into industries that are so dependent on fossil fuels?

Moore: Right. I think the 2030 peaking objective is pretty achievable, and it would be very surprising if China were to miss it, despite the — as you pointed out — continued investment in new coal plants and things like that. Now what’s really important, and this ties to my answer to the second part of your question about the 2060 commitment is I do have some concerns and a little bit of skepticism. And what reconciles those two apparently contradictory responses is that peaking is not the same as cutting, which is to say that saying that your emissions are going to effectively plateau and presumably, though not necessarily, begin to decline is not the same as saying, “Make absolute cuts or emissions reductions,” which is, from a climate perspective, what’s really important.

Yes, you want to stop increasing emissions, but you also need to cut them. And how quickly you cut them is as important, I would say, or also as important as how much you cut them. So that’s really where the uncertainty comes in. I don’t doubt the political commitment to the 2060 target, which is to say I believe that from Xi Jinping on down, China’s leaders are sincere in believing that this is a significant issue. It’s a strategic priority to reduce emissions to net zero by 2060.

Where I’m a little bit concerned is more on the technical and economic fronts. I’m not sure it is possible with current technology to cut those emissions that deeply and on that timeline at an acceptable cost. Now we have a lot of investment in clean technology research and development. Forty years is a long time. We’re sure to see some significant technological improvements, but on current technology, we just don’t have a good way to decarbonize big, diverse economies at really what I would say is an acceptable economic cost. We really need more investment in research and development to lower that cost, and therefore to make it more politically viable to achieve this energy transition.

Stone: Scott, thanks very much for talking.

Moore: Thanks so much, Andy. Thanks for having me.

Stone: Today’s guest has been Scott Moore, Director of China Programs and Strategic Initiatives at the University of Pennsylvania. I’d like to introduce the newest member of the Energy Policy Now team. Nick Rohleder is a very sharp graduate student in Environmental Engineering and Technology here at Penn. He’ll be contributing ideas, insights, and research to the podcast going forward. Visit the Kleinman Center’s website for more podcasts, as well as energy policy research and digests. To keep up with the latest from the center, subscribe to our monthly newsletter on our website. Thanks for listening to Energy Policy Now and have a great day.