China Briefing 5 September 2024: ‘Energy transition’ white paper; Steel permits ‘paused’; China’s investment in Africa

§ Key developments

‘China energy transition’ white paper launched

WHITE PAPER: The National Energy Administration (NEA) launched a white paper, titled “China energy transition”, on 29 August, reported state news agency Xinhua. The white paper says China’s investment in the energy transition reached $676bn in 2023, “making it the world’s largest investor in this field”, Xinhua said. Wind and solar exports “helped other countries reduce CO2 emissions by about 810m tonnes in 2023”, the outlet added.

NEA REMARKS: At a press conference launching the paper, NEA head Zhang Jianhua said that wind and solar power generation increased 10-fold from 2013 to 2023. Wan Jinsong, the NEA’s deputy director, stated that, over the past decade, more than half of incremental electricity demand had been met by “clean energy” – echoing recent findings by the thinktank Ember, which were covered by Carbon Brief.

‘DUAL-CARBON’ COMMITMENT: The Global Times, a state-affiliated newspaper, said the white paper “offers a detailed elaboration on China’s commitment”, as a developing country, to “keep global energy industrial and supply chains stable and maintain energy security in an open environment”. In an analysis for energy news outlet BJX News, Chen Zongfa from the China Electricity Council, argued that, if the country is to deliver its “dual-carbon” commitment, the “low-carbon transformation” of coal power in China is “now compulsory”.

EARLY PEAK?: Science, citing analysis for Carbon Brief showing that China’s CO2 emissions “may have peaked in 2023”, said the country could therefore meet the first part of its dual-carbon target “well before” 2030. However, at the white paper launch, Song Wen, the NEA’s deputy director of planning, responded to a question from Bloomberg about early peaking by saying that while the country is “confident” it will peak emissions by 2030, “energy demand is still growing and the outlook is uncertain”. The outlet subsequently reported: “China’s top energy officials downplayed growing speculation that the country’s carbon emissions have already peaked.” Song also told the press conference: “major targets we have committed to will not be moved”.

RENEWABLE ACHIEVEMENTS: China’s wind and solar capacity reached 1,206 gigawatts (GW) in July, surpassing a goal President Xi Jinping set in 2020, Bloomberg reported. The outlet added that this achievement came almost “six years earlier than planned”. Meanwhile, China’s “new-energy storage” installation capacity in 2025 was estimated to reach 86.6GW, more than double its original target, said business news outlet Caixin. 

New steel capacity ‘paused’  

STEEL PAUSE: China suspended approvals for new steel capacity in a notice issued by the Ministry of Industry and Information Technology (MIIT), pausing a long-standing capacity “swap” policy for the sector. The policy had been ”aimed at reducing iron and steel capacity by requiring newly-permitted facilities to be smaller than the ones they replace”, reported the Hong Kong-based South China Morning Post (SCMP). The “pause” was announced because “the supply and demand relationship of the steel industry is facing new challenges”, while the “green and low-carbon [transition and] structural adjustment…[have] put forward new requirements”, added the newspaper. The government is currently “consulting relevant parties [on how] to revise” the swap policy, according to SCMP.

CARBON CUTS: On Twitter, the Centre for Research on Energy and Clean Air (CREA) said the announcement from MIIT amounted to “suspending all new steel plant permits” and came after no new permits had been issued for coal-based steel capacity in the first half of the year. CREA noted its earlier analysis finding potential to cut emissions in China’s steel sector by 200MtCO2 by 2025, as well as a government action plan targeting savings of 53MtCO2 in 2024/25 relative to 2023.

TOO LATE?: This is not the first time China has paused and reformed its steel swap policy. However, the Trivium China Net Zero Weekly newsletter said the “rules have never actually curbed steel production (or energy consumption or emissions)”. In fact, China’s steel capacity increased in 2023, despite steel demand falling as the “property sector struggles, leaving steelmakers – of which only 5% are profitable – with razor-thin margins”, added the newsletter. (China Briefing’s last issue flagged a Bloomberg article on China’s steel “industry crisis”.) S&P Global commented that “the move seems to be too late as the current steel capacity has already exceeded demand” and would “not [be] enough to curb industry expansion”. 

FOCAC held in Beijing plus climate talks

FOCAC: The 2024 Summit of the Forum on China-Africa Cooperation (FOCAC) began on 4 September in Beijing where Xi Jinping said “China and Africa will announce a new positioning of China-Africa relations”, reported the Global Times. On the first day of the three-day event, state-supported media outlets, People’s Daily, People’s Liberation Army Daily, Guangming Daily and Economic Daily, shared the same front page that featured Xi at the forum. “Dozens of African leaders” converged on Beijing “aiming to secure funding for infrastructure projects and trade deals”, said SCMP. FOCAC is held every three years and has seen Beijing “making huge financial pledges to support big-ticket infrastructure projects”, the newspaper added. (See the Spotlight section below.) 

NEW PLEDGE: On 5 September, Xi pledged in a keynote speech to “to step up Chinese support to Africa…with funding of nearly $51bn”, Reuters reported. The newswire added that Beijing aimed to “move away from funding big-ticket infrastructure and focus instead on selling…advanced and green technologies”. The People’s Daily published Xi’s speech in full, in which he said China will “help Africa build ‘green growth engines’ [and] narrow the gap in energy accessibility”, including by developing 30 “clean energy” projects and establishing a China-Africa forum on peaceful use of nuclear technology.

CLEAN EXPORTS: People’s Daily reported that, “under the framework of FOCAC, China has been working with African countries within its capacity to help them…achieve sustainable development”. The Chinese exports of electric vehicles (EVs), lithium batteries and solar products to Africa “have rocketed in recent years”, increasing by 291%, 109% and 57% in 2023, respectively, said SCMP. In the meantime, Bloomberg said that China’s relationships with Africa helped “Beijing lock down access to energy and minerals, while providing an outlet for its pent up industrial capacity”.

US AND UK: US president Joe Biden and Xi will “speak by telephone in the coming weeks” and may “meet once more before Biden leaves office”, reported the Financial Times. China Daily, a state-sponsored newspaper, said both sides “agreed to continue cooperation…in addressing climate change”. Meanwhile, Reuters reported that US climate envoy John Podesta was visiting China from 4-6 September to “bridge gaps on issues such as [climate] finance” with his counterpart Liu Zhenmin. Liu recently made a statement, covered by People’s Daily, saying “[global] efforts to address climate change are still far from sufficient”. On 23 August, Xi and UK prime minister Keir Stamer held a phone call – summarised in readouts from the Chinese and UK governments – and mutually agreed to continue combating climate change, wrote the Global Times. 

Canada imposed 100% EV tariffs 

CANADA TARIFFS: Canada announced it is to impose 100% tariffs on China-made EVs which “matches US tariffs and follows similar plans announced by the European Commission”, reported the Washington Post. The announcement came after “encouragement by US national security advisor Jake Sullivan”, added the newspaper. It also quoted Canadian prime minister Justin Trudeau saying: “We’re doing it in alignment, in parallel, with other economies around the world that recognise that this is a challenge that we are all facing.” In response, China “expressed strong dissatisfaction” and “firm opposition” against Canada’s move, Xinhua reported. Bloomberg reported that China said it would “launch an anti-dumping probe into Canadian rapeseed imports”. Beijing was also considering raising import tariffs on all “large engine petrol-powered vehicles”, wrote SCMP, calling the option a “tit-for-tat response” to EU tariffs on Chinese EVs.
EV Q&A: Carbon Brief published an in-depth Q&A on the “global ‘trade war’ over China’s booming EV industry”. It explained how the “trade war” has been driven by fear of China’s EV “overcapacity” and triggered by the fact that exports of China-made EVs – including foreign brands, such as Tesla – increased 160-fold from 2019 to 2023. (See Captured below.) Still, Carbon Brief analysis found that 88% of China-made “new energy vehicles” (NEVs), which include EVs and plug-in hybrids, were sold domestically in 2023. The article also noted that from 2009-2023 – in addition to strong policy support – the Chinese government poured an estimated $230bn into the NEV industry, with this rate accelerating nearly three-fold over the past five years, even as some subsidies ended.

§ Spotlight

Chinese financing of renewable energy in Africa rebounds

Climate cooperation between China and Africa is a key focus of this week’s Forum on China-Africa Cooperation (FOCAC), where dozens of leaders have gathered in Beijing for the three-yearly meeting. 

The Chinese government declared in 2021 that it would stop funding coal power abroad. New data reveals a rebound, after a lull over the past two years, in Chinese financing of renewable energy projects across Africa. 

In this issue, Carbon Brief examines this change, as well as the prospects for the renewable energy buildout on the continent.

Billions in investment

China has been a significant financier of energy projects in Africa – particularly fossil fuel projects. Some 75% of the continent’s electricity comes from fossil fuels, although it accounts for less than 3% of the world’s energy-related carbon dioxide emissions.

In the past, the bulk of Chinese financing had been driven by the backing of China’s two policy banks – the Export-Import Bank of China (EXIM) and the China Development Bank (CDB) – and directed particularly towards coal-fired power plants. 

The two banks had issued $182bn in loans across Africa, primarily into the energy sector. According to the Boston University Global Development Policy Center, between 2000 and 2023, 15% of the policy banks’ total loans by value went to fossil fuels and 12% to hydropower plants.

By contrast, it said that less than 1% of loans by value were issued for solar, wind or geothermal projects.

‘Small and beautiful’

In 2023, EXIM and CBD committed $502m to three energy projects, including a solar plant in Burkina Faso and a hydropower plant in Madagascar, ending a “hiatus” on energy loans in 2021 and 2022.

The lull may have been driven in part by economic pressures during the Covid-19 pandemic. 

However, it also seems that the banks paused to make the “necessary adjustments” to their investment strategies following pledges in 2021 by Chinese president Xi Jinping to stop funding coal power abroad and shifting to build “small and beautiful” projects, the Boston University Global Development Policy Center said.

During this period, other Chinese stakeholders, ranging from state-owned enterprises (SOEs) such as PowerChina and China Three Gorges Corporation to privately held companies such as JA Solar, agreed to finance or participate in renewable energy projects. The projects include more than 20 gigawatts (GW) of solar projects, 9GW of hydropower and 1GW of wind power projects, according to data compiled by consulting firm Development Reimagined.

The firm’s program manager and policy lead on China’s climate finance, Fu Yike, told Carbon Brief that Chinese SOEs have expressed interest in “exploring new ways to do projects in Africa” following Xi’s 2021 pledges, including through involvement in solar projects. 

According to Development Reimagined’s analysis, China could install more than 224GW of clean energy in Africa by 2030, meaning its participation in Africa’s energy transition will be crucial for the continent to meet its target of 300GW by 2030. 

Fu added that solar installations, in particular, are expected to be a feature of China’s energy installations in Africa in the future. 

Steep ‘learning curve’

According to the London-based thinktank ODI, mechanisms developed under China’s Belt and Road Initiative (BRI) could help deploy affordable low-carbon technologies in Africa, in much the same way that it facilitated “spillovers” of domestic infrastructure capacity, such as railways and ports, to the continent.

However, many SOEs accustomed to developing coal and hydropower face significant challenges to their ability to pivot towards renewables, Dr Frangton Chiyemura, lecturer in international development education at the Open University, told Carbon Brief. 

SOEs previously developed energy infrastructure through engineering, procurement and construction (EPC) contracts financed by policy bank loans, which only obligated them to build infrastructure, rather than operate and maintain it.

Now, African policymakers are increasingly pushing for equity financing models, encouraging Chinese companies to invest and hold shares in renewable energy projects.

However, Chiyemura told Carbon Brief this involves business processes that many Chinese SOEs are not used to, such as joining in open competition with other firms and writing bids.

Furthermore, some companies also hold concerns about investment risks in Africa, Fu said. 

The majority of African nations received low rankings from the World Bank “on their ease of doing business”, which means the regulatory environment is less conducive to the starting and operating of a local firm. 

Fu added that private Chinese companies prefer to partner with SOEs, which could link their involvement more firmly to the interests of the Chinese state, to limit their exposure to risks. 

Part of this, Chiyemura said, is due to the “fast-moving” environment of African energy regulations.

According to Dianah Ngui Muchai, a collaborative research manager at the African Economic Research Consortium, “flexible and innovative [financial] instruments” for renewables projects and “clear and realistic” policy goals are key to boosting investment in Africa.

South Africa and Ethiopia have been attempting to do this through their development of equity-financed wind power projects, Chiyemura told Carbon Brief.

“It’s a learning curve, but we believe that maybe in the next five to 10 years…we are likely to see a number of Chinese companies developing these projects through equity financing”, he said. 

This Spotlight was written by Anika Patel, the full article will be published soon.

§ Watch, read, listen

CHINA COP29: Azerbaijan media outlet News.AZ interviewed Yang Jianchu, the regional coordinator of the Chinese delegation being sent to COP29.  

PUBLIC TRANSPORT: Shanghai-based English news outlet Sixth Tone published an article about “Chinese bus companies’ pivot to new energy”. 

DESERT FLOOD: A comment piece in China Daily by Zhang Zhouxiang said the sharing of videos on social media showing the flooding in the Taklamakan Desert in western China was “not enough to create awareness about climate change”. 

‘THREE STAGES’: Tsinghua University proposed “three stages” for the “key elements required to build a new energy system” in China, reported Jiemian. 

§ Captured

The value of Chinese-made EV exports, which includes battery electric vehicles and plug-in hybrids, rose 160-fold from 2019 to April 2024 Carbon Brief analysis found. The only dip came in early 2022, due to strict Covid-19 lockdowns. In cumulative terms, the UK (red) has imported more Chinese EVs than any other country since 2019, though the EU, as a bloc, is larger (dark blue).

§ New Science

Climate change will exacerbate land conflict between agriculture and timber production

Nature Climate Change

A new study found that up to a quarter of land around the world currently used for forestry could become “more suitable for agriculture” by the end of the century, potentially leading to land conflicts. Agricultural frontiers in forestry “occur[ed] disproportionately in key timber-producing nations”, including China, and were closer to populated places and existing cropland than frontiers outside forestry land, the authors added.

The feasibility of reaching gigatonne scale CO2 storage by mid-century

Nature Communications 

A new study on the “feasibility” of scaling up CO2 storage found the Intergovernmental Panel on Climate Change’s sixth assessment report “vastly overestimate[ed] the feasibility of deployment in China, Indonesia and South Korea”. The authors used a model that “considers constraints [in carbon storage deployment] from both geology and scale-up rate”. They found that global carbon storage could reach a maximum rate of 16bn tonnes of CO2 per year by 2050, if the US contributed 60% of the total. However, they said that a rate of 5-6bn tonnes of CO2 per year, with the US contributing around 1bn tonnes per year, was a more “feasible benchmark”.

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