Blueprint for China's new growth story

Carbon neutrality goal sets the foundation for the country's high-quality growth and development over the coming decades

China sits today at the confluence of a number of important global changes－technological, energy and industrial revolutions. On top of these is the existential challenge of climate change and the need for the global community to address this urgent planetary crisis. It is possible to respond to these challenges in a way that navigates a new path toward growth in China, even as the economy moves toward carbon neutrality.

China's goal of carbon neutrality, announced in September 2020, is a significant contribution to the international efforts to limit the global temperature rise to below 2 C above preindustrial levels, preferably 1.5 C. Indeed, it is consistent with the global efforts to limit the temperature rise to 1.5 C according to recent global modeling studies that try to identify the most globally "cost-effective" pathways to 1.5 C. At the same time, the sooner China can peak its CO2 emissions before the goal of 2030 and achieve carbon neutrality before 2060, the greater the chance of limiting warming to 1.5 C.

Achieving carbon neutrality before 2060 requires significant changes to restructure China's economy and implies substantial, rapid and far-reaching transitions in Chinese energy, land, urban and industrial systems. It will not be possible to bring China's CO2 emissions to net zero without joint efforts across all sectors of the economy－including construction, industry, transportation, electricity, refining, agriculture and forestry. Meanwhile, implementing China's neutrality goal requires establishing linkages among long-term strategic objectives and near-term prioritized actions. China's electricity needs to be generated fully carbon-free, while the industry, construction and transportation sectors must reduce emissions by 90 percent, 90 percent and 80 percent respectively compared to 2015 levels (The percentages are calculated based on 2015 numbers from the scenarios of Energy Foundation China's Synthesis Report 2020 on China's Carbon Neutrality rather than from China's inventories). Emissions from industry should peak immediately, and electricity and buildings should peak in five years, followed by transportation around 2030.

While it is useful to view decarbonization through the lens of sectoral strategies, achieving the goal of carbon neutrality will also require actions that cut across sectors. Key cross-cutting decarbonization strategies include: Promoting sustainable demand in all end-use sectors while maintaining high living standards through more efficient use of energy, structural change, urban planning and lifestyle changes; decarbonizing electricity generation by phasing out coal power generation without carbon capture, utilization and storage and rapidly increasing generation from a diverse portfolio of technologies dominated by renewables and supplemented by nuclear and fossil or bioenergy with carbon capture, utilization and storage; electrifying end-use sectors by increasing electric vehicles, using electricity for low-temperature heat in industrial applications, and transitioning to electric space and water heating in buildings; switching to low-carbon fuels such as hydrogen and biomass in industry and transportation when electrification is not feasible or economically viable; sequestering carbon in natural systems (such as forests and soil) or through CO2 removal technologies to facilitate carbon neutrality even if emissions do not reach zero in some hard-to-decarbonize applications such as air travel or high temperature heat processes.

China's carbon neutrality goal is just part of China's economic transformation, yet it sets the foundation for the country's high-quality growth and development. This is the new growth pathway that will enable China to strengthen its economy, create new sources of employment, foster new innovation and industrial competitiveness, and in doing so, reach the goal of an "ecological civilization", which can be seen as a blueprint for a new growth story that achieves multiple goals.

China is already a leader in technologies of the emerging global green economy, such as solar photovoltaic cells, batteries and electric vehicles－and is poised to become a global leader in 5G technology and artificial intelligence. If structured well, this new growth pathway can lead to accelerated innovations and development in these and other emerging industries, allowing China to solidify its position as an international leader in the science and technologies of the 21st century, while leveraging them into a beneficial industrial transformation domestically and long-term economic competitiveness.

A low-carbon transition in line with the new growth pathway requires further scaling up low-carbon investment. China needs a rapid scaling-up and structural change of investments in energy infrastructure. By 2035, annual low-carbon investment in China should reach $330 billion and it needs to grow $420 billion by 2050 to achieve the 1.5 C target. Investment in electrification and energy efficiency will also increase rapidly, as there are significant low-cost opportunities to reduce emissions through efficiency improvements in buildings and industry.

The economic transformation reflected in the carbon neutrality goal can promote strong employment and broadly shared economic prosperity. The size of the global green economy is comparable to that of the oil and gas sector.

Thirty-eight percent of all global renewable energy jobs are in China, 4.4 million jobs in 2020, and the number is expected to rise to 14 million by 2050. China's progress toward carbon neutrality will further expand job opportunities across the spectrum of the green economy, including battery production, renewable energy, construction (for example, retrofitting existing buildings), related services (such as shared mobility) and foundational technologies such as digitization.

While China has made great strides in air pollution control, current air quality standards are insufficient to meet long-term goals. Combining these standards with the green development implied by China's carbon neutrality goal will put China on a path to meet the highest air quality standards and significantly reduce health risks from air pollution.

The heavy reliance on imported fossil fuels undermines China's energy security. China's progress toward carbon neutrality will also allow it to install more domestic renewable energy capacity, reducing its reliance on imported fossil fuels and leading to enhanced energy security.

Fu Sha is the program director of the Low Carbon Economic Growth Program and the director of strategy and planning at Energy Foundation China. Leon Clarke is a research professor and research director at the Center for Global Sustainability at the University of Maryland.