Current Opinion

Carefully selected insights and analysis from China’s thought leaders on climate change and the low-carbon transition

Focus of green finance in China shifts to high-quality development

Peng Wensheng, Chief Economist, CICC

In a new phase of the green transition, China is refining its focus on green finance, moving from quantity to quality. The recent issuance of the “Guidelines to Further Strengthen Financial Support for Green and Low-Carbon Development” by seven authorities, including the People’s Bank of China on April 10, clarify the direction of this evolving mission. The guidelines articulate several key points:

Firstly, they outline mid to long-term goals for green finance, providing market participants with a framework to develop stable expectations and comprehensive action plans.

Secondly, there is an emphasis on implementing an environmental disclosure framework across various financial institutions, underscoring the pivotal role of carbon accounting in enhancing green finance standards.

Thirdly, a dual strategy is proposed, focusing on transitioning high-carbon capacity while simultaneously nurturing green capacity. This entails supporting the greening and decarbonization of high-emission industries and projects, along with expediting the establishment of standard systems for transition finance.

Additionally, the guidelines advocate for research into financial products linked to carbon credits, aiming to broaden the involvement of financial institutions in carbon market transactions gradually.

Lastly, they underscore the importance of international cooperation.This involves aligning Chinese standards with global norms to facilitate the international flow of domestic green capital and attract international investment into China’s green and low-carbon assets.  

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Development of new energy vehicles stands as a crucial national strategy in China     

Ouyang Minggao, Academician of the Chinese Academy of Sciences 

The development of new energy vehicles stands as a crucial national strategy in China, based on considerations of oil security, air pollution, and industrial advancement. China is also a front-runner in automotive intelligence. Electric vehicles, with their inherent advantage in intelligence, outmatch traditional fuel-powered vehicles in terms of autonomous driving capabilities. 

New energy vehicles represent a technological ecosystem rather than a mere shift to electrification. This comprehensive system encompasses the essence of the Fourth Industrial Revolution and propels three fundamental transformations: electrification, intelligence evolution, and decarbonization.  

The realization of the three transformations aims to make China an automotive powerhouse. Beyond that, it involves not only domestic strategies but also global market integration, fostering thus upscale development.   

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 Hydrogen energy project investment speeds up while green hydrogen policy needs to be strengthened    

Liu Xueye, Project Lead for Green Economics & Yang Li, Senior Program Director for Energy Transition, Institute of Global Decarbonization Progress (iGDP) 

After analyzing hydrogen energy policies and major projects listed by 28 provinces from 2020 to 2023, iGDP had the following findings: first, during the past four years, investment in hydrogen energy listed in major projects of each provincial region has accelerated, with an overall increase of three times. 

Second, hydrogen production projects make up a small percentage of the total, in which green hydrogen manufacturing projects are predominant. However, there is a lack of sufficient policies and guidance for related segments. 

By categorizing these policies and projects, it was noted that China lacks unified national standards for defining green hydrogen, its technical pathways, and thresholds. The “Standards and Evaluation of Low-Carbon Hydrogen, Clean Hydrogen, and Renewable Hydrogen” group standard released by China Hydrogen Alliance in 2020 sets thresholds at 14.51 kg CO2e/kg H2 for low-carbon hydrogen, and 4.9 kg CO2e/kg H2 for clean hydrogen while renewable hydrogen requires renewable energy as the hydrogen source. These thresholds exceed the 3.4 CO2e/kg H2 set by the EU and Japan for green hydrogen.  

In provincial major project lists, we can find emerging hydrogen projects that utilize waste resources for production. These projects not only effectively utilize existing waste materials but also reduce land usage and the demand for renewable energy in hydrogen production processes. Therefore, incentivizing relevant technological innovations and effectively reducing greenhouse gas emissions, particularly carbon dioxide emissions, generated during hydrogen production processes, may be a key focus area for future hydrogen energy policies in China.   

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To reduce energy intensity, China will implement stricter measures targeting high-energy-consuming industries    

Yang Fan, Chief Policy Analyst, CITIC Securities 

The goal of reducing energy consumption per unit of GDP by 13.5% during the period of China’s 14th Five-Year Plan(2021-2025) now seems challenging to achieve, and it may not stay a rigid goal. It is anticipated that there won’t be a resurgence of “rushing to carbon peak”, but stricter measures will be implemented, especially targeting sectors with high energy consumption and pollution.

In the short term, reducing the proportion of the mining and construction industries, increasing the utilization of clean energy, and enhancing energy efficiency in traditional and high-energy-consuming industries are the three main focal points for reducing energy consumption this year.

Regarding long-term mechanisms, the expansion of the carbon market and the construction of a new energy system are expected to accelerate within the year. It is projected that the steel, electrolytic aluminum, and cement industries will be brought into carbon trading this year, and reforms in the electricity market are also expected to progress rapidly.

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TTP newsletters track and unpack the latest discussions on climate change in China, helping to identify new trends, gaps, and opportunities in climate communication

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Chinese climate scientists’ recent studies on impacts and attribution

Highlighting the negative impacts of climate change is an important way to raise awareness and motivate action. However, a common challenge in climate communications is the lack of local stories that readers can relate to and resonate with.

The situation is improving, including in China, as climate impacts become more visible and the volume of related studies keeps growing. Climate attribution, a method of quantifying the link between a specific extreme weather event and climate change, has made a special contribution.

In this winter edition of the TTP newsletter, we collect recent studies carried out by Chinese scientists that explain how climate change is affecting China and its various regions and examine the role of climate change in specific local extreme weather events.

Click here for the the full newsletter.

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