Q&A: What does China’s 14th ‘five year plan’ mean for climate change?

§ What are the ‘two sessions’?

“Two sessions” is a collective term for two major national political meetings held in China every spring. Known as “liang hui” in Mandarin, they are the plenary sessions of the National People’s Congress (NPC), China’s top legislative body, and the Chinese People’s Political Consultative Conference (CPPCC), the country’s top political advisory body. It is worth noting that the CPPCC does not hold any legislative power.

With thousands of attendees each year, the two sessions normally open on 3-5 March in Beijing – with the CPPCC taking the lead – and run for 10-12 days. There have only ever been two exceptions to their opening dates, both due to the Covid-19 pandemic. Last year, the sessions were postponed to May, while this year their duration was shortened to six-and-a-half days.

§ Why are this year’s ‘two sessions’ important?

During the annual conferences, the leadership of China’s ruling party – the Communist Party of China (CPC) – sets out its vision for the next 12 months. The central government reviews and approves national economic and social development plans and receives reports of the implementation of previous plans. Thus, the two sessions are considered the most important annual political gatherings in China.

This year’s two sessions carry extra significance because they also oversaw the approval of the nation’s next “five year plan” – the 14th in a series stretching back to 1953. They were also held just months after Chinese leader Xi Jinping announced China’s new ambition to enhance its climate pledge for 2030 – its nationally determined contribution under the Paris Agreement – and to reach “carbon neutrality” by 2060.

This year, Chinese leaders gathered at the Great Hall of the People in Beijing to cast their gaze on the nation’s post-coronavirus economic growth. They have also set key energy and climate targets that will guide the country over the next five years, in addition to setting long-term “prospects” for 2035. This provides policymakers with a “direction of travel” for what they have to deliver over the next 15 years.

Owing to Xi’s pledge last September, “CO2 emission peak” and “carbon neutrality” were two of the most popular topics among the sessions’ participants this year. For example, influential participants from energy companies, heavy-industry manufacturers and technology firms introduced a series of proposals at the two sessions on ways to reduce the nation’s emissions.

§ What is a ‘five year plan’?

A five year plan, or FYP, is a comprehensive policy blueprint released by China every five years to guide its overall economic and social development.

The system was first used by the Soviet Union in 1928 under Stalin’s rule and later adopted by the Communist Party of China to set out economic quotas for a newly founded People’s Republic of China.

Chairman Mao Zedong led the drafting of the country’s first five year plan, which ran from 1953 to 1957 and was officially approved in 1955.

Since then, China has released and implemented 13 of these guidelines, which are made up of a series of documents at national, sectoral, provincial and regional levels.

At this week’s two sessions, the NPC reviewed and approved the “outline for the 14th five year plan for economic and social development and long-range objectives through the year 2035” (shortened as “outline”), which had been in the making since 2018.

The outline’s preparation and formulation involved several key government organs, including the State Council, China’s highest administrative authority led by the premier, and the Central Committee of the Communist Party of China (CCCPC), a political body comprising top leaders. (A recent Carbon Brief article gave more explanation about China’s governance structure.)

The drafting of the 14th outline began in late 2020 after the CCCPC had conducted relevant research and deliberation, before presenting its assessment of the country’s situation in a formal “opinions” document to the State Council. The council then drafted the outline, after receiving this opinion document.

Over the years, China’s FYPs have evolved beyond their initial functions of economic roadmaps. The official document now covers all important issues, from national security through to carbon emissions. Xi calls the plans “an important way for our party to govern the country”.

The outline is commonly referred to in media reports outside of China as if it is “the 14th five year plan”. Importantly, however, the outline serves as an overarching guideline for the successive forumulation of more detailed planning for 2021-2025, which includes sector-specific planning such as on the cement industry, and thematic planning such as on national security, as well as administrative planning at all levels, from central, provincial, municipal down to county level.

These plans are due to be published later in 2021 and in early 2022, to break down the targets set in the outline at sectoral and administrative level, and to provide detailed action plans for implementation, evaluation and reporting.

For the 14FYP, they will include plans on peaking CO2 emissions by 2030 and on energy saving and emission reduction formulated by the Ministry of Ecology and Environment (MEE), on energy, renewable energy, coal, electricity development forumuted by the National Development and Reform Council (NDRC) and the National Energy Administration (NEA), and on energy intensive industrial sectors such as iron and steel, cement, aluminium and chemicals formulated by the Ministry of Industry and Information Technology (MIIT).

§ What does the 14FYP say about energy and climate?

The 148-page outline of the 14th FYP gives an insight into the main goals for China in the period 2021-2025, as well as its longer-term goals for 2035.

Energy and climate indicators are included under “new progress of ecological civilisation”, which is one of the six overarching economic and social development goals of the 14th five year plan. This section appears in the text after the goals on economic reform and society and before those on public welfare and governance.

More broadly, “energy” is at the heart of the 14FYP outline, appearing 59 times throughout the document. The paper’s authors dedicate an entire section, titled “Establishing a modern energy system” (see below), to map out a plan for this transition.

Furthermore, “energy” appears in a dozen other chapters, such as ecological planning, green economy, environmental protection and resource conservation, national economic security and energy and resource safety strategy.

In comparison, the word “energy” is mentioned six times more frequently than “climate” in the text. The terms “climate” and “climate change” appear just nine times, mainly in the section titled “actively responding to climate change” (see below).

In total, the 14FYP’s outline devotes four of its 20 “indicators” on economic and social development to energy and climate change (see table below), including half of the “binding” targets. This means that the central government is determined to achieve them as part of its political key performance indicators (KPIs).

Specifically, as shown in the table above, the outline requires an 13.5% reduction in the nation’s energy consumption per unit of GDP – also known as “energy intensity” – during the 2021-25 period and a 18% cut in its CO2 emissions per unit of GDP, also known as “CO2 emissions intensity”. (just below the table of indicators).

The outline calls for an improvement of the forest coverage rate from 23.4% in 2020 to 24.1%. Moreover, it expects the country’s total energy production to reach more than 4.6bn tonnes of coal equivalent from coal, petroleum, natural gas and non-fossil energy. Previous five year plans had set a cap on energy production rather than a minimum level.

The first three of these binding energy and climate goals are considered “green ecology” targets, while the fourth, on energy production, is categorised as security-related.

The 14FYP outline proposes to increase the share of non-fossil energy in total energy consumption to around 20% by 2025, up from 15.8% in 2020. Yet, this is not labelled as an “indicator”, which means it is neither indicative nor binding by nature.

The percentage proposed is in line with the political pledge made by Xi in December 2020 on increasing the ambition level of China’s NDC for 2030. Xi promised that China would increase the share to around 25%. To date, China has not officially submitted an enhanced NDC to the United Nations Framework Convention on Climate Change (UNFCCC), despite the deadline being the end of 2020. 

As for climate change, the 14FYP outline reaffirms the implementation of the NDC for 2030 without listing specific new targets. It also demands that the nation formulates an action plan on how to peak CO2 emission before 2030, as soon as possible.

In describing the long-term prospects for 2035, it repeats Xi’s political pledge in December, that “CO2 emissions steadily decrease after peaking”. Xi used exactly the same words when describing China’s carbon neutrality goal before 2060.

Meanwhile, the 14FYP outline presents a list of “construction projects for the modern energy system”. It covers six key areas of energy development, including the construction of eight large-scale clean energy “bases”, coastal nuclear power, electricity transmission routes, power system flexibility, oil-and-gas transportation and storage capacity. The geographical distribution of the key projects is illustrated in the map, below.  

Experts interviewed by Carbon Brief say that more detailed targets on climate actions, such as the total CO2 emission control target (the “CO2 emission cap”), are most likely to be disclosed in the 14FYP on greenhouse gas emission control and prevention. 

Similar to 12FYPs and 13FYPs, experts expect more detailed targets for the energy sectors, such as the coal consumption and production, renewable energy development and utilisation, and electrification rate and electricity power structure, to be announced in sector specific plans issued by NDRC and NEA in the coming year.

Additionally, the MEE has launched the formulation of the “action plan for peak emission by 2030” which requires provincial governments to formulate a “provincial peak emission action plan” by April 2021.

According to the technical guidelines, this will include a series of detailed indicators – shown in screenshot below – such as total energy consumption, energy mix, share of fossil fuel in total energy consumption, and dual CO2 emission caps – intensity and absolute emissions – on industry, building, transport, agriculture and homes.

§ What are the unanswered questions?

The 14FYP outline has left many unanswered questions concerning China’s energy transition and its efforts to tackle climate change. For example, the outline stresses that the nation should implement a cap system that is “based primarily on carbon intensity control, with the absolute carbon cap as a supplement”. Yet, the outline does not give an exact number on the CO2 emission cap. 

In response to some international observers’ comments on the outline being “conservative”, or lacking strict measures, Chinese experts interviewed by Carbon Brief say they expect such details to be clarified in the 14FYP’s forthcoming sector-specific and regional plans. The Ministry of Ecology and Environment (MEE) will set targets for nationwide greenhouse gas emission controls between late 2021 and early 2022.

Some of the international coverage of the outline has drawn on analysis suggesting the plan could allow China’s emissions to continue increasing at the rate of 1-1.7% per year until 2025.

Such analysis shows the energy and CO2 intensity targets could still be met, even as overall emissions increase, depending on the rate of GDP growth over the plan period. Notably, however, the 14FYP outline drops a five year GDP growth target in favour of year-by-year goals, meaning such emissions calculations are uncertain.

The table below is taken from analysis published by Lauri Myllyvirta at the Centre for Research and Clean Air, which shows what could happen to a variety of targets, according to three different levels of GDP growth. 

Similarly, some observers and media have expressed disappointment about the lack of clear language regarding the phasing out of coal. For example, the share of coal in the energy mix is missing, as is the total coal consumption control target (“coal cap”). The latter, first introduced in the 13FYP on energy development published in 2016, was a “binding indicator”, which required the percentage of coal consumption in total energy consumption to drop from 64% to 58% over five years. 

Min Hu, executive director of the Innovative Green Development Program (iGDP), points out that an “energy consumption cap” already existed in previous energy planning for the 2030 energy revolution, which sets a total control target for total energy consumption at “no more than 6bn tonnes of standard coal” by 2030.

She adds that coal consumption will need to slightly decline over the 14FYP period, if the forthcoming plan on energy development incorporates the advice – such as from Energy Research Center of China’s State Grid – to steadily reduce the share of coal consumption in primary energy down from 57% in 2020 to around 50% by 2025. However, this still represents 100-200 gigawatts (GW) of new coal-plant capacity.

Dr Fuqiang Yang, a distinguished researcher of the Institute of Clean Energy at Peking University, underlines the “superior” political priority for the Chinese government of achieving an emissions peak and, ultimately, carbon neutrality. He believes that, as a result, a “coal cap” for 2021-2025 will eventually be announced in the subsequent FYP on energy development and coal development, which the National Development and Reform Council (NDRC) and National Energy Administration (NEA) are now formulating.

He adds that the outline’s binding indicators on energy will still have an actual effect on restricting coal consumption and its share in the energy mix – even without an explicit “coal cap”. He explains to Carbon Brief:

“Based on current targets, by 2025, non-fossil energy will definitely reach 20%. Natural gas steadily increases by 3% every five years, so we can assume that it will reach 11.5% in 2025 and oil may account for 18.5%. Under the [non-fossil energy] target, the share of coal in the energy mix must [therefore] be reduced to at least 50% or below – and I think it’d be very likely to drop to 48%, in comparison to 56.8% in 2020.”

Despite the absence of the “coal cap” and CO2 emission cap, Min Hu still thinks the outline sends out a “very important signal”. She tells Carbon Brief:

“When China added ‘CO2 intensity’ to the existing ‘energy intensity’-based control targets in the 11FYP, many people also thought it would purely be a maths exercise. But that was a big turning point – the 14FYP outline, too, for climate actions in China. It has been a very difficult journey to achieve this step. After all, there is still much opposition within the system.”

Professor Ji Zou, chief executive and president of the NGO Energy Foundation China (EFC), agrees that these targets do not “come easy”. He says, until early 2020, there was still much debate among policymakers and their advisors on whether incorporating low-carbon development targets would bring a “big shock to the economy”. The economic slowdown after the Covid-19 lockdowns made the decision even more difficult. He tells Carbon Brief:

“The debate was very fierce: one side pushed for incorporating more low-carbon indicators and more ambitious and stringent targets, while the other side insisted on reducing binding targets for deepening the reform towards a market economy. The hesitation continued until the end of last summer and momentum was finally achieved under the strong political determination on furthering decarbonisation. In the autumn, the top leadership set the tone for the 14FYP: the plan is to not only continue the path on low-carbon development, but also to accelerate the transition, in particular, to incorporate the carbon-neutrality target into the planning.”

In addition, the 14FYP outline specifies that China should “strive to increase the storage and production of oil and gas” and “accelerate the construction of natural gas network pipelines”. This is consistent with China’s national policy on coal-to-gas in the 13FYP under the dual pressure of air pollution “control and prevention”, as well as energy and CO2 intensity reduction.

Most recently, the “No1 central document”, which was co-issued by the CCCPC and State Council in 2021, also lists “promoting natural gas to enter rural areas” as part of the clean energy infrastructure project. 

Dr Jiang Lin, a China energy expert at the University of California-Berkeley, tells Carbon Brief that natural gas has been at the centre of the debate on energy transition. The discussion is partially caused by natural gas’s role as a form of “transitional energy” to replace coal. It is also spawned by the potential danger of a high-carbon lock-in due to the fact that natural gas is a fossil fuel. He adds:

“Natural gas has a positive contribution to reducing air pollution and to meet the peak demand for power in certain situations. However, if we want to arrive at a net-zero future, we have to also bring down the emission from natural gas to zero. [Continuing to develop natural gas] is not 100% aligned with the carbon neutrality goal in the long-term.” 

§ Will the 14FYP keep China on track to meet its climate pledges?

Leading Chinese energy and climate experts interviewed by Carbon Brief say China is “on track” to fulfil its promise of peaking emissions by 2030, although many say more efforts would be needed for China to meet the carbon neutrality target by 2060.

Prof Zou says he is “totally confident” that China will achieve the peak emissions target before 2030. 

A study from December 2020 reviewed the available scenarios under which China could reach net-zero emissions by 2060. It concluded that an 18-20% reduction of CO2 intensity during the 14FYP period would put the country on the trajectory towards carbon neutrality by 2060 and would be consistent with a 1.5C temperature rise globally, as shown in the chart below.

The research was published by EFC and written by a group of Chinese and international climate scientists, including advisors to the State Council and National Development and Reform Council (NDRC), as well as three Intergovernmental Panel on Climate Change (IPCC) co-chairs and lead authors. 

Prof Zou adds that when the 14FYP is evaluated in a few years, there is a “very big chance” that the actual reduction will “surpass 20%”. He explains:

 “The current target (18% of CO2 emission intensity reduction in 14FYP) is at the lower end of the range [needed to be consistent with a 1.5C pathway], which means it’s already aiming for an ambitious goal. Besides, we also need to look at the possibility of overachievement: if you break down the 2% into five years, it means a mere 0.4% of additional reduction [each year].”

Prof Zou says appeals from “international colleagues” for more stringent climate targets and ambitious policies are sensible, but they also reflect a general misunderstanding about China’s political process and its overall strategic objectives for the next four decades. He tells Carbon Brief:

“It’s too early to say whether the 14FYP is ambitious enough for carbon neutrality in 2060. We are standing at the beginning of a five year plan. We can’t simply conclude whether China could achieve the goal in 40 years based on its performance in five years, which is only one-eighth of the length up to 2060. We have to look at the trajectory forward.”

Dr Lin, who has carried out several modelling research projects into China’s decarbonisation scenarios, says based on the research findings, it is “highly possible” for China to peak its emissions by 2030. He also thinks the country’s decarbonisation transition would stimulate economic growth and bring a series of additional benefits, such as creating more jobs.

China exceeded the CO2 intensity reduction targets of the previous two five year plans, as shown in the chart below. China first introduced the five year CO2 intensity reduction control target as a “binding” indicator of its five year plans in 2011.

To date, a total of three targets have been announced, namely, the 12FYP (2011-2015), 13FYP (2016-2020) and 14FYP (2021-2025), as shown in dark blue. In reality, China overperformed on this target twice in row, as shown in red.

For the current 14FYP period, China is expected to once again overachieve with an estimated 19.4% reduction in CO2 intensity, according to research by 18 leading climate science institutes in China, led by Tsinghua University’s Institute of Climate Change and Sustainable Development (ICCSD). This reduction would put China on a path to overachieving the CO2 intensity target in its NDC for 2030, the research suggests.

Min Hu says that it would not be a “fair judgement” of China’s climate action if people only look at the “binding indicators” made in the 14FYP outline – or any FYPs – without acknowledging China’s past overachievements of its targets. 

“Looking back, most of the targets – from renewable energy installed capacity through to CO2 intensity – were overperformed. We cannot calculate the trajectory simply based on the targets illustrated in the 14FYP outline and say that they will not be sufficient for [the 2060 climate neutrality pledge].”

Dr Yang, who has spent the past four decades working on energy and climate policies in China, has a different view. He says he fully understands the “conservative considerations” from the top policymakers, who usually do not make promises they cannot fulfill – a logic that is deeply rooted in China’s political culture. Nevertheless, Dr Yang calls for more ambitious targets and “daring” thinking from the nation’s leaders, due to the urgency of climate change. He tells Carbon Brief:

“How about raising the target to 19%? Even if it wouldn’t be fully achieved – say, at 18.5% – it’s still not a bad deal. Many developed countries have published strict targets that they could not eventually meet, but they provided a clear direction for efforts.”

According to Prof Zou, expected improvements in CO2 intensity mean that most provinces in China could reach peak emissions, or come close to it, during the 14FYP period, based on a yet-to-be-published study compiled by the Energy Foundation China. With provinces and cities that contribute around 80% of China’s emission “having peaked” or “expected to peak before 2025”, he believes achieving nationwide peak emissions during the 14FYP is a “low-hanging fruit”. 

§ Why does the 14FYP not set a ‘carbon cap’?

The lack of a formal “cap” on carbon emissions is, perhaps, one of the most confusing parts of the 14FYP outline.

Even though the outline does not set a carbon cap, it does say that China will “implement a system based primarily on carbon-intensity controls, with the carbon cap as a supplement”. 

Given that China has not proposed a carbon cap, how can it be used to supplement the plan?

Some China experts have told Carbon Brief that they believe the government has a willingness to introduce emission caps soon. However, such targets would be difficult to enforce at present because of two issues.

First, a top-down approach would not address the reality faced by local officials. Second, China does not currently have enough detailed research on how to achieve “carbon neutrality” in order to support the government in coming up with an overall carbon cap.

In the past, the central government has used mandatory top-down instructions to resolve issues surrounding energy consumption and energy intensity. But there have been substantial disadvantages and setbacks, such as cutting of power supplies to meet targets.

Dr Fuqiang Yang from Peking University says the Chinese government has learned from this experience with regard to setting a carbon cap.

During the 13FYP, China introduced a “dual-control” policy, demanding that energy consumption per unit of GDP – energy intensity – be reduced by 15% by 2020 compared with 2015. The policy also required that total energy consumption remained under 5bn tonnes of standard coal equivalent (tce). The State Council then divided the national “dual-control” goals into goals for individual provinces. 

However, Dr Yang says: “With only a few employees in the National Energy Administration, how can the goals be reasonably broken down [and implemented]?” 

He adds that many provinces were unsatisfied, saying the goals were unrealistic, which caused serious consequences. For example, Zhejiang province, which is just south of Shanghai, resorted to limiting electricity consumption and even cutting off electricity at the end of 2020 to achieve its goal. This forced many factories to halt production and left a large number of residents without heating in winter.

Dr Yang says that the plan to use “the carbon cap as a supplement” demonstrates that a cap will eventually be set up during the 14FYP period. But he believes that the formulation of the cap will not be top-down, but rather bottom-up, which means that the central government will not set an overall cap and then send individual targets to the provinces.

Instead, each province and sector would determine its own targets and those would then be aggregated into a national carbon cap. He says this is a “more reliable plan”.

Ma Jun, the director of the Institute of Public and Environmental Affairs (IPE), an environmental research NGO based in Beijing, agrees with Dr Yang. Ma says that there are also some “technical reasons” for China not to mention a carbon cap in the 14FYP. For example, there is little research to date into how China can best achieve its new carbon neutrality goal.

Ma says the goal of achieving carbon neutrality is more important than peaking emissions. Research by IPE finds it is actually “very easy” to reach the emissions peak, which could tolerate the building of carbon-intensive projects. Ma calls this a “low-quality peak”. But such a measure does not help achieve carbon neutrality over the longer term. In fact, it can make the goal even harder. Ma Jun tells Carbon Brief:

“High-quality peaking is the key to provide favourable conditions for subsequent carbon neutralisation. However, the current research on high-quality peaking is still insufficient.”

§ Cap: Will a ‘bottom-up’ approach lead to loopholes?

But would a change from “top-down” to “bottom-up” planning, in which each province sets its own carbon cap, lead to looser emissions goals?

Yes, according to China experts. 

Dr Jiahua Pan, a member of the Chinese Academy of Social Sciences, said at a conference in January 2021:

“Recently, a local official told me that carbon peaks are not difficult to achieve. If we built a batch of high-carbon projects during the 14FYP and 15FYP periods and then stopped afterwards, won’t we easily achieve a carbon peak that way?”

Dr Jinnan Wang, a member of the Chinese Academy of Engineering and dean of the Environmental Planning Institute of the Ministry of Ecology and Environment, makes a similar point. He said in an interview with China Energy News, a state-affiliated media, in January:

“Many provinces believe that the use of fossil energy can continue to be substantially increased before 2030. They are even planning to first reach a new and higher peak of carbon emissions during the 14FYP and will only consider the decline after reaching the ‘new peak’.”

§ Cap: How can loopholes be closed?

Dr Yang says that any targets informed by local governments could indeed be very loose, but the final say still lies with the central government. Not only will the central government closely review the targets proposed by local governments, it will also use them as benchmarks to appraise the performance of local officials.

He says carbon intensity is viewed as a binding indicator for provincial leaders. So, if a governor fails to meet this goal, they will lose their job. By comparison, a carbon peak is a guiding indicator. So, if two governors have both met their carbon intensity goals, then the one who is deemed to have performed better in peaking carbon emissions may get a promotion.

Dr Yang says this is similar to how international climate agreements have worked. The Kyoto Protocol was a top-down, compulsory allocation of targets to countries and some have argued that it was not successful. Now, under the Paris Agreement, it has changed to a bottom-up approach, with countries putting forward their own NDCs every five years under the so-called “ratchet mechanism”.

“Otherwise, negotiations may still be ongoing,” he says.

The bottom-up approach is closely related to China’s unique governance system, especially the tussle of power between the central and local governments. Dr Min Hu says it is important to encourage regional authorities to draw up targets that are stricter than those set by the central government. She says that only when the local goalposts are higher can those policies from the central government be realised. She adds:

“Take the peaking of emissions as an example, everyone is expecting China to peak by 2025. If all provinces set 2025 as their goal, even though the central government does not announce such a timeline, it is still possible for the whole country to hit the target in advance.”

But Ma hopes the loopholes can be closed using another method. IPE is cooperating with the Chinese Research Academy of Environmental Sciences to study the establishment of a “carbon peaking/neutrality index”, which – as an effort to restrict misleading self-reporting – uses key indicators to measure progress and monitor all provinces and industries to ensure they would peak their emissions in a responsible and so-called “high-quality” way.

§ Cap: How can “high-quality peaks” be achieved?

Ma believes that a “peaking timeline” should be brought forward: “The timing of peaking is very important. The sooner the peak is reached, the more that later carbon emissions can be restricted.”

Prof Zou at the EFC believes achieving the required emission reductions needs many structural changes involving multiple sectors, including power, heavy industry, transport, building and land use. All of these changes require time.

For example, it will be relatively slow to reduce power consumption and increase non-fossil energy sources initially. This will all require massive technical and financial investment on various issues, such as grid flexibility and energy storage.

But once past the “tipping point”, carbon emission will drop at accelerated speeds, says Prof Zou. He adds:

“This is similar to changing of direction for a giant ship. It will be slow for the ship to overcome inertia and turn around, but once it’s turned around, it will speed up.”

Compared to establishing goals, he says it is more important to consider the levels of policy enforcement, infrastructure construction and technological support.