China Briefing 5 October 2023: EV investigation; Forest rules; BRI and climate  

§ Snapshot 

EV INVESTIGATION: China deemed the “formal” launch of the EU’s investigation into Chinese subsidies for electric vehicles as a “naked act of protectionism”, but refrained from making similarly strong public remarks during a visit from EU trade commissioner Valdis Dombrovskis.

DOUBLING NUCLEAR: The China Nuclear Energy Association said China can greenlight six to eight new nuclear power units a year, with the technology’s share of electricity doubling to 10% by 2035 and then 18% by 2060.

TREE RULES: China reformed communal forest tenure systems to encourage environmental protection and provide another revenue stream for low-income rural households. The rules could encourage the development of carbon sinks – or increase logging activity.

SPOTLIGHT: As China’s “belt and road initiative” celebrates its tenth anniversary, Carbon Brief asked four experts what it could mean for climate action in the decade ahead.

NEW SCIENCE: Studies found that citizens experience relatively limited levels of “energy justice” under China’s implementation of energy transition policies and, separately, that there were “substantial health co-benefits” from residential decarbonisation, particularly in northern China.

§ Key developments

EU split over Chinese EV probe 

EV SPLIT: The European Commission has “formally launched” an anti-subsidies probe into electric vehicles manufactured in China, a process that should last one year, reported Bloomberg. The investigation was triggered by a request from France, according to the Hong-Kong based news outlet the South China Morning Post (SCMP). France has already changed “eligibility rules” to “make sure French state cash is not benefiting Chinese carmakers”, reported Reuters. But German chancellor Olaf Scholz has opposed the commission’s move on the grounds that “our economic model should not be based or rely on protectionism”, reported another Reuters article. The bloc’s solar, wind and battery manufacturers have also sought support to compete against cheap Chinese competition, reported SCMP. German-language business newspaper Handelsblatt said the EU plans policies to make its wind industry more competitive with Chinese manufacturers. 

CHINA’S REACTION: Beijing repeated its “strong dissatisfaction” with the investigation, calling it “a naked act of protectionism”, reported state news agency Xinhua. However, Bloomberg noted that China did not “publicly” share that criticism during commission executive vice-president Valdis Dombrovskis’ four-day trip to the country, shying away from confrontation amid “a broader push to stabilise geopolitical relationships [and] an economic slowdown at home”. Another Bloomberg article said that Tesla will be a significant focus of the EU investigation, having “enjoyed perks in China that other international companies struggled to obtain”. Elsewhere, Xie Zhenhua, China’s special envoy for climate change, “stressed the importance of opposing trade protectionism” at a summit in China, reported CGTN, a state-affiliated Chinese media outlet. The Communist party-backed People’s Daily published a commentary under the “Zhongyin” byline – a nom de plume for top party leadership – saying the fact that “more than 60% of the world’s new energy vehicles are produced and sold in China” was an example of the country’s economic dynamism.

METALS SCRAP: Meanwhile, debate continues over China’s dominance of critical mineral supply chains, with the Financial Times reporting comments by US energy secretary Jennifer Granholm saying the situation could make the global energy transition “infinitely more complex”. China’s export of germanium, used for making solar panels and other technologies, fell to “zero” in August after the government imposed export controls, reported TechSpot. At the same time, China has told local EV companies to procure chips and other components domestically to “set up a self-sufficient EV supply chain”, reported DigiTimes Asia. However, Reuters reported that US firm AXT and a number of unnamed Chinese firms had received export licences in September for “gallium and germanium products” for certain customers.

Growing role for nuclear 

10% BY 2035: Nuclear power’s share is expected to double to 10% of China’s electricity by 2035 and then grow to 18% by 2060, with installed capacity climbing from 57 gigawatts (GW) today to 400GW by 2060, according to the China Nuclear Energy Association (CNEA), Reuters reported. The outlet said China expected to approve “six to eight new nuclear power units” every year from now on. The state-run newspaper China Daily quoted Wang Binghua, the director of CNEA’s nuclear energy public communication committee, as telling the Paper: “In the context of achieving both the carbon goals and ensuring economic growth, nuclear energy has demonstrated its irreplaceable advantages.” According to the outlet, he said reaching the 10% projection would cut carbon dioxide (CO2) emissions by about 920m tonnes over this period. (For more background, see Carbon Brief’s Q&A: How China is using nuclear power to reduce its carbon emissions.)

SHIFTING VIEWS: Meanwhile, China Daily published comments made in a speech by  International Atomic Energy Agency (IAEA) director general Rafael Grossi, who said that the public’s view towards nuclear energy has shifted. He stated that the “emergency” brought about by climate change was “undeniable” and that nuclear energy could play a “positive role” as part of the solution. “In the past few years, we have not been vocal enough about the benefits of nuclear power, but that page has been turned,” he added.  

New forestry rules

CARBON SINKS: China released a plan to reform its communal forest tenure system in order to “enhance farmers’ incomes and promote green growth”, reported state news media CGTN. One aim of the plan is to “improve forest quality”, the outlet said, adding that “green industries, such as ecological tourism, maintaining healthy forests and environmental education” will be established. Business news outlet 21st Century Daily noted in an opinion column that the plan “encourages eligible places to carry out forestry carbon sink projects and establish a forestry carbon sink trading market”. The Legal Daily reported that the measures call for provinces to “strengthen the supply capacity of important primary forest products…and encourage provinces, cities and counties with forest resources to cultivate forestry ‘pillar industries’”. In an email to subscribers, consultancy Trivium China said the reforms could lead to greater logging activity.

CCER TRADING: Meanwhile, business news outlet Jiemian published comments by experts on the inclusion of forestry carbon sinks in China’s certified voluntary emission reductions scheme (CCERs). They explained some of the risks involved in the scheme, including guarding against oversupply, filling “legal gaps” in the policy framework and finalising mechanisms for distributing the proceeds of credit sales.

China’s ‘key role’ at COP28

CLIMATE DIPLOMACY: COP28 president-designate Sultan Ahmed Al Jaber wrote in an opinion article for state news agency Xinhua that China will play a “key role” in delivering on a COP28 agenda that “aims at fast-tracking an equitable and orderly energy transition, fixing climate finance, and focusing on people’s lives and livelihoods, while underpinning everything with full inclusivity”. He added that China is critical both for “driving clean energy adoption” in the global south and for supplying funding to support other developing nations’ energy transitions. Separately, China News quoted Zhang Jun, China’s permanent representative to the United Nations, as saying that China’s climate actions stand in sharp contrast to the “empty promises” of western nations. Elsewhere, Foreign Policy said foreign minister Wang Yi is expected to travel to the US in October to manage their “increasingly frosty relations” and to “pave the way for a highly anticipated, but still unscheduled meeting between US president Joe Biden and Chinese president Xi Jinping”. 

COAL CONTINUES: Meanwhile, speaking at a forum in Beijing, China’s climate envoy Xie Zhenhua said that the “complete phasing-out of fossil fuels is not realistic”, reported Reuters. This came as Hong Kong-based South China Morning Post covered a report from energy consultancy Rystad Energy finding that “China will increase its coal consumption until 2026 and will only record declines after 2027”.

§ Spotlight 

How will China’s belt and road initiative impact climate action?

China will host the third Belt and Road Forum for International Cooperation this month, as “2023 mark[s] the 10th anniversary of the belt and road initiative (BRI)”, Reuters reported. More than 110 countries are set to attend. 

The BRI is a global infrastructure project that aims to develop transcontinental trade routes between China and the rest of the world. With China having stated an intention to pivot the initiative towards low-carbon energy development, Carbon Brief asks leading experts what impact the BRI might have on climate action in the decade ahead. Their responses have been edited for clarity and length.

Prof Kevin P Gallagher, director of the Boston University Global Development Policy Center:

As the BRI moves into its second decade, China can solidify its pivot toward low-carbon development in the global south. According to our research at the Boston University Global Development Policy Center, in the early stages of the BRI the majority of China’s overseas energy finance was…in fossil fuels in general and coal-fired power plants in particular. Emissions from the operating Chinese-financed power plants around the world now emit upwards of 245m tonnes of CO2 annually, roughly the energy-related CO2 emissions from the entire country of Spain or Thailand annually. In 2021, China announced it would not build new coal-fired power projects abroad and to step up support for low-carbon development. Moving forward, China could pledge to ramp up overseas financing for low carbon development and adopt a green project pipeline facility to ensure alignment with these directives. 

Prof Lin Boqiang, dean of the China Institute for Studies in Energy Policy, Xiamen University:

In some countries along the “belt and road”, despite the rapid growth of energy demand, the development of green energy is limited due to their relatively backward economic and technological level and the lack of advanced clean-energy technology and facilities. Through the construction of renewable energy projects, such as wind and solar power, China can provide technical, financial and experience support to host countries to promote the development and upgrading of their renewable energy industries. By providing more clean-energy supplies to these countries…China helps them reduce their dependence on traditional energy sources and promotes energy transformation and green development. At the same time, some countries along the belt and road have problems such as unstable energy supply, energy poverty and low energy efficiency…Cooperation to develop renewable energy projects…will help these countries improve their energy security and promote sustainable development along the belt and road.

Yasiru Ranaraja, founding director of the Belt and Road Initiative Sri Lanka (BRISL)

China’s commitment to shift the BRI towards low-carbon energy development has significant implications for climate action in the coming decade…China, through the BRI, has emerged as a crucial player in advocating a three-phase approach to low-carbon development: funding, construction and operation. Under the BRI umbrella, numerous infrastructure projects…are dedicated to green development…For example, in Sri Lanka, the Colombo International Container Terminal (CICT), which is an investment development project under BRI, has embraced green technology since its inception in 2014.

This terminal has witnessed a remarkable increase in cargo volumes over the years while prioritising environmental sustainability. The shift to electric cranes has resulted in a 45% reduction in CO2 emissions and a 95% decrease in diesel consumption…Additionally, more than 80% of the terminal’s electricity comes from solar technology. The terminal’s success story…exemplifies how commercial prosperity and environmental protection can coexist harmoniously. 

Prof Christoph Nedopil Wang, director of the Griffith Asia Institute, Griffith University:

China controls almost all parts of the green-energy supply chain – from critical minerals for batteries to wafer production for solar, from manufacturing wind turbines to the necessary financing. Without China’s cooperation, a green-energy transition is hardly achievable – whether in the BRI or beyond…BRI countries, meanwhile, must improve their energy planning, energy policy and power markets to be able to attract sufficient Chinese investments in green energy. This should include a phase-down of fossil subsidies and better utilisation of blended finance to reduce financing cost for green energies, as well as longer-term green energy PPAs (power purchase agreements). A big question remains on the accelerated phase-down of Chinese sponsored coal-fired power plants and replacement with green energy. A recent study by the Green Finance & Development Center and Climate Smart Ventures shows significant financial benefits for Chinese sponsors of plants in Vietnam and Pakistan when accelerating retirement and replacement.

§ Watch, read, listen

PEAK OIL: The Financial Times explored the tension that exists between China’s role as the largest global consumer of oil and the minor role that oil plays in China’s energy mix, following comments by the chief executive of one of China’s largest oil companies that “perhaps this year China’s domestic oil demand will reach a peak”.

CRITICAL MINERALS: In the third part of a series on China and energy geopolitics, the Oxford Institute for Energy Studies discussed China’s importance for the critical minerals used in new energy supply chains and what its dominance could mean for the future. 

METHANE RESEARCH: The Woodrow Wilson Center interviewed Dr Hu Tao, founder of the Lakestone Institute for Sustainable Development, on his institute’s work on methane mitigation from food waste and manure in China, as well as on his views on how China’s voluntary carbon credit scheme (CCERs) could mitigate agricultural methane.

MARKET MECHANISMS: Caixin published part of the upcoming report on China’s “carbon neutral strategy and path selection”, written by the Boao Forum for Asia Academy. The report advocates improving market mechanisms to support a “just” energy transition, such as research investment, carbon markets, power grid pricing and funding non-renewable “clean” energy solutions. 

§ New science 

Costs and health benefits of the rural energy transition to carbon neutrality in China
Nature Communications

A study found that residential decarbonisation “would remarkably improve air quality in northern China, yielding substantial health co-benefits”. Decarbonising rural cooking and heating, the researchers added, “would triple contemporary energy consumption from 2014 to 2060”, which would considerably reduce energy poverty in China. The effects would be most strongly felt in Shandong, Heilongjiang, Shanxi and Hebei provinces. 

Assessing energy justice in climate change policies: an empirical examination of China’s energy transition
Climate Policy

A new study explored “key aspects of energy transition policy implementation in China” through the lens of distributional, recognition and procedural justice. From a case study assessing China’s ‘coal-to-gas’ energy transition policy in rural regions, it found a “markedly low” level of procedural justice, linked to poor access to political participation and low transparency. It also found “insufficient acknowledgment of the needs of specific groups” during the energy transition. By contrast, the level of distributional justice, defined as equitable allocation of benefits, was “reasonably high”. 

China Briefing is compiled by Anika Patel and edited by Wanyuan Song and Simon Evans. Please send tips and feedback to [email protected].