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    China's President says climate targets cannot compromise energy security

    January 26, 2022 - CE Noticias Financieras


      President Xi Jinping said efforts to achieve China's climate goals must work in sync with the government's other objectives, as policymakers seek to balance sometimes conflicting environmental and economic goals.

      Xi said the nation's carbon goals should not clash with other priorities, which include ensuring adequate supplies of food, energy and materials "to guarantee normal life for the masses," according to comments made at a Politburo session, the official Xinhua news agency reported Tuesday

      The leader said China must ensure it has enough coal and that oil and gas production grows steadily, in his clearest comments yet that cutting emissions should not come at the expense of other economic goals. An unprecedented energy crisis in the fall has highlighted concerns that China's reliance on fossil fuels remains as entrenched as ever.

      Xi set China's carbon targets in 2020, pledging to peak emissions by the end of the decade and achieve a carbon-neutral society by 2060. They marked a sea change in China's approach to global warming and prompted a series of directives from across government and industry as policymakers and company executives sought to incorporate the president's vision.

      But in July last year, the Politburo appeared to change course, urging a softening of the aggressive measures taken to reduce emissions because they were hampering efforts to stimulate sluggish economic growth. In his latest comments, Xi also called China's mission to cut carbon "urgent and difficult" and said cutting emissions cannot mean cutting productivity.

      Inflation concerns

      The central problem China has faced is that its carbon policies have restricted the supply of high-polluting raw materials such as coal, metals and fertilizers, driving up prices and making Beijing's attempts to control inflation very difficult.

      To a large extent, Xi's intervention appears to be designed to set the tone for policymakers rather than signal a substantial change in direction. The government has already released five-year plans in recent weeks that address a range of industries, including materials and energy efficiency, which build on last year's general policy directive that will guide China's economic development through 2025.

      Xi has long emphasized the need to strengthen domestic oil and gas production. But his more recent and broader comments again highlight China's lingering anxieties around food, energy and material supplies. And they highlight how the drive to reduce emissions has at times come into direct conflict with efforts to control commodity prices, which rose over the past year largely due to coal shortages and rising energy costs.

      Coal is the raw material that best represents China's environmental and economic balancing act. It provides more than half of the country's energy and most of its electricity. It is also the dirtiest fossil fuel and the biggest contributor to the country's emissions.

      Curbing coal use is the best way for China to meet its commitments to limit the rise in global temperatures. But last year it was forced to increase fuel production to record levels to avoid the worst effects of the energy crisis.

      Xi is clearly re-emphasizing a security-first approach to power generation, which will support renewable energy development, but backed by coal, said Leo Wang, an analyst at BloombergNEF.

      The steel factor

      Another key product is steel, which accounts for about 15% of the country's carbon. There, China managed to cut production last year to reduce emissions. But it is uncertain whether it will be able to maintain that cap, given the need to stimulate the economy with renewed infrastructure spending.

      BNEF expects a new approach this year, "with less emphasis on net capacity reduction as China seeks to adopt greener steelmaking technologies," according to a report released Tuesday.

      Also of interest is the fact that China's latest five-year plan for energy efficiency did not reiterate its goal of reducing the economy's carbon intensity by 18%, which could suggest less emphasis on that measure even as the nation moves forward on its broader climate goals.

      In his latest comments, Xi also said that reaching carbon targets cannot be a "one-size-fits-all" exercise and that local governments will need to move at different paces. In a report on Tuesday, Greenpeace noted some big regional differences, with emissions in Beijing on a downward trend between 2005 and 2019, while the manufacturing hub of Zhejiang province saw a 49% increase.

      China's latest coal directive also calls for regional differentiation, with consumption cuts of up to 10% planned in some of the most industrialized areas until 2025, as China seeks to deliver on its pledge at last year's climate talks in Glasgow that domestic coal demand will begin to fall from 2026.


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